Question

the maxim company purchased a building for $500,000. the building was appraised at $575,000. which accounting principle requires maxim to record the building at $500,000?

Answer 1

Business entity assumption is required to maxim to record the building at $500,000.

What is Business entity assumption?

Business entity assumption, also known as separate entity assumption or the economic entity concept, is an accounting principle that argues that all businesses must maintain their financial records independently of their owners and other businesses. All revenue generated by the company's operations must be reported as revenue, and all expenses must be those directly related to the maxim. Any owner's personal expenses shouldn't be charged to the business. Due to the precise separation of the Business entity assumption, the firm may be examined for tax and profitability using accurate financial data rather than a maxim combination of personal and business money.

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