The CEO of a business owns a home and two automobiles. The company the CEO works for also owns automobiles and a home in a remote area used for strategic planning meetings by its executives. Which principle or assumption "draws a sharp boundary" around the possessions of the CEO and the assets of the business for which he works?
A) the stable-monetary-unit assumption
B) the objectivity assumption
C) the going-concern assumption
D) the entity assumption

Question

Quizplus · Accepted Answer

The entity assumption states that the business is separate from the personal lives of its owners or executives. Therefore, it draws a sharp boundary between the possessions of the CEO and the assets of the business, meaning that the CEO's personal belongings (such as home and automobiles) are not considered the property of the business and the company's assets (including automobiles and the remote area home) are not considered the personal property of the CEO.

The CEO of a Business Owns a Home and Two