Abe Cox is the sole owner and manager of Cox Auto Repair Shop. In 20A, Cox purchased a new automobile for personal use and continued to use an old truck in the business. Which of the following fundamentals prevents Cox from recording the cost of the new automobile as an asset to the business?

Question

Quizplus · Accepted Answer

The separate-entity assumption states that the business is separate from its owner(s), and therefore assets and liabilities should be recorded separately. Since the new automobile was purchased for personal use, it is not considered an asset of the business and should not be recorded as such.

Abe Cox Is the Sole Owner and Manager of Cox