Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 2 - Conceptual Framework for Financial Reporting - Exercises - Page 74: E2-9a

Answer

This entry is in direct violation of the economic entity assumption.

Work Step by Step

The economic entity assumption stipulates that each economic activity must identify with a specific unit of accountability. Thus, the error in this account is charging the expenditure to the wrong economic entity.
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