An interaction between a company and another economic entity is referred to as an external event. The reply is correct.
According to the "Economic entity assumption," an entity's operations must be maintained apart from those of its owner and other economic entities.
An economic entity is one of the accounting assumptions made by generally accepted accounting principles. An economic entity can be almost any kind of grouping or aspect of society. Hospitals, businesses, towns, and government organizations are a few examples of economic entities.
Each division's financial records should be kept separately in accordance with the economic entity assumption. For instance, a cost associated with the orchard shouldn't be listed under the dairy farm.
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