Drew Mellow,owner of Mellow's Melodies,also owns a personal residence that costs $400,000.The market value of his residence is $600,000.During preparation of the financial statements for Mellow's Melodies,the accounting concept most relevant to the presentation of Drew's home is
A)monetary unit.
B)a going concern entity.
C)the economic entity concept.
D)the time period assumption.

Question

Quizplus · Accepted Answer

The economic entity concept states that the personal affairs of the owner should be kept separate from those of the business. In this case, despite the fact that the owner Drew Mellow owns a personal residence, its presentation in the financial statements of Mellow's Melodies is not relevant since it is not a business asset. Therefore, the economic entity concept is the most relevant accounting concept in this scenario.

Drew Mellow,owner of Mellow's Melodies,also Owns a Personal Residence That