Economic Entity Assumption: Definition & Examples

Instructions:

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question 1 of 3

What is the economic entity assumption?

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1. MJ owns a music store and has the following assets: store building, company vehicle, mortgage on MJ's house, equipment used in her store and furniture and fixtures in her store. Using the economic entity assumption, identify which items MJ would include on the music store's financial statements.

2. What are two aspects of the economic entity assumption?

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About This Quiz & Worksheet

The questions in this quiz will measure your understanding of the economic entity assumption. To do well on the quiz, you'll need to be familiar with how the economic entity assumption is applied.

Quiz & Worksheet Goals

Here's what you'll be tested on:

  • Definition and example of the economic entity assumption
  • Two aspects of the economic entity assumption
  • Benefits of the economic entity assumption
  • How to apply the economic entity assumption

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about the economic entity assumption
  • Information recall - access the knowledge you've gained regarding two aspects of the economic entity assumption
  • Interpreting information - verify that you can read information regarding the benefits of the economic entity assumption and interpret it correctly

Additional Learning

Be sure to check out the related lesson titled Economic Entity Assumption: Definition & Examples. You'll learn more about this topic, including:

  • Maintaining separate accounting for each department
  • Determining a company's net income
  • Separating business activity from personal activity
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