Question

What is violated here?

Don Smith is the sole owner of a company called Hardware City. The company recently paid a $150 utility bill for Smith's personal residence and recorded a $150 expense.

Answer 1

The violation in this scenario is the recording of a personal expense of the owner's residence as a business expense.

Step-by-step explanation:

The violation in this scenario is the recording of a personal expense of the owner's residence as a business expense. This violates the principle of the separate entity concept in accounting, which states that personal expenses should not be mixed with business expenses. Business and personal expenses should be kept separate to ensure accurate financial reporting and financial statements.