A local business man owns several different companies.His accountant prepares separate annual financial statements for each of these businesses.This is an application of which of the following principles:
A)Full disclosure
B)Periodicity
C)Economic entity
D)Matching

Question

Quizplus · Accepted Answer

The principle of economic entity requires that an organization should be treated as a separate entity from its owners, and its financial transactions should be reported separately from those of the owners or other related entities. In this case, the local business man's different companies are separate legal entities, and therefore their financial statements should be prepared separately.

A Local Business Man Owns Several Different Companies