Economic Entity Principle or Business Entity Assumption

Economic Entity Principle or Business Entity Assumption

• Recording of financial transactions of business entity should be kept separate from the owner’s personal financial transaction recording.
• The transaction should not be mixed.
• Asset, Liabilities, Cash transaction, Bank accounts should be kept separate.

• This should be maintained strictly as owner and business entity pays TAX separately.  

The economic Entity principle is also known as business entity assumption.