The business entity concept means that
A) the owner is part of the business entity
B) an entity is organized according to state or federal statutes
C) an entity is organized according to the rules set by the FASB
D) the entity is an individual economic unit for which data are recorded, analyzed, and reported

Question

Quizplus · Accepted Answer

The business entity concept states that the entity is a separate and distinct economic unit for accounting purposes. This means that the entity's financial information is recorded, analyzed, and reported separately from the owner(s) or any other entities. Option A is incorrect because it contradicts the concept of a separate entity. Option B is incorrect because while state or federal statutes may dictate the legal organization of an entity, it does not necessarily relate to accounting principles. Option C is incorrect because the FASB sets accounting standards but does not dictate how an entity should be organized.

The Business Entity Concept Means That