Andre Dickinson, owner of Andre's Fine Wines, also owns a personal residence that costs $475,000. The market value of his residence is $625,000. During preparation of the financial statements for Andre's Fine Wines, the accounting concept most relevant to the presentation of Andre's home is
A) the economic entity assumption.
B) the fair value principle.
C) the monetary unit assumption.
D) convergence.

Question

Quizplus · Accepted Answer

The economic entity assumption is relevant here as it requires that the business transactions be kept separate from the personal transactions of the owner, meaning Andre's personal residence should not be included in the financial statements of Andre's Fine Wines.

Andre Dickinson, Owner of Andre's Fine Wines, Also Owns a Personal