Don Jones is the proprietor (owner) of Donny's, a retailer of golf apparel. When recording the financial transactions of Donny's, Don does not record an entry for a car he purchased for personal use. Don took out a personal loan to pay for the car. What accounting concept guides Don's behavior in this situation?

Question

Quizplus · Accepted Answer

The economic entity assumption states that the financial transactions of a business and its owner(s) should be kept separate. Don's personal car purchase should not be recorded as a transaction of Donny's because it is for his personal use and not related to the business.

Don Jones Is the Proprietor (Owner) of Donny's, a Retailer