Principle of Continuity
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- Economic Entity Concept
- Hey DeQuan, wanna get some Lunch?
- Sounds good, John. Let's go to that diner down the street.
- What a delicious meal, I'll pay for the meal. I can pay with my business credit card.
- Actually, the bill of our lunch should be payed on our own account, because of the economic entity concept.
- The economic entity concept is an accounting principle that states that activities and transactions made by the owner for personal use should be kept separate from the transactions of their business.
- Personal transactions like food should NOT be recorded on the business's transactions.
- However, transactions that affect the business like the office electricity bill can be recorded.
- Now that I know I should be keeping my personal transactions apart from my business ones, I can pay the bill with my personal account.
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