economic entity assumption

Definition

An accounting principle that establishes a clear delineation between any economic entity and its stakeholders for the purpose of maintaining separate transaction records.

Use this term in a sentence

You should always make sure you have done a lot of research before you decide to make an economic entity assumption.

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The company had not clearly defined their economic entity assumption, and had thus gotten in trouble when the transaction records of their business got too tied up in the transaction records of their stakeholders.

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The economic entity assumption applied in his yearly board presentation was believed to be within the acceptable boundaries set by the members and was therefore well received.

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