Joshua Thomas is the owner of Nexus Inc., a manufacturer and retailer of computer hardware. Joshua recently bought a new car as a gift for his daughter. Since Joshua paid for the car from the earnings of the business, he recorded it in the books of Nexus as an asset. Which of the following concepts or principles of accounting is Joshua violating?

Question

Quizplus · Accepted Answer

Joshua is violating the economic entity assumption, which requires that the business and its owner be treated as separate entities. Recording a personal expense as a business asset violates this principle. The monetary unit assumption, cost principle, and going concern assumption are not relevant to this scenario.

Joshua Thomas Is the Owner of Nexus Inc