The company, Discover, Embrace & Fulfill Scenic Tours offers road journeys to tourist sites in Melbourne and Victorian Provincial towns.
The company has a fleet of luxury bus coaches. The major shareholder and executive director Mr Edward Alexander has a passion for vintage (old classic) cars. On rare occasions, he collects important clients from their hotel to the departure lounge of his business. He uses his private 1958 Rolls Royce, registration EA-001 motor vehicle.
Mr Edward Alexander believes he should list the 1958 Rolls Royce, EA-001 as a non-current asset in the Statement of Financial Position of Discover, Embrace & Fulfill Scenic Tours.
Is there a breach of an accounting principle and if so what accounting principle?
Group of answer choices
Yes, Going Concern Principle
Yes, Accounting Entity Principle
No, no breach of the Accounting Entity Principle
No, no breach of the Going Concern Principle
Yes, Historical Cost
No, no breach of the Accounting Entity Principle
The Accounting Entity Principle states that a business's financial records should be kept separate from its owners' personal assets and liabilities. In this case, Mr. Edward Alexander's 1958 Rolls Royce is a personal asset, not owned by the company Discover, Embrace & Fulfill Scenic Tours. As such, it should not be listed as a non-current asset in the company's Statement of Financial Position. This separation maintains the integrity of the company's financial statements and adheres to the Accounting Entity Principle. There is no breach of this principle in this scenario.
