What principle ensures that assets and liabilities of a business are not mixed with the personal assets of owners?

The principle that ensures that the assets and liabilities of a business are kept distinct from the personal assets of its owners is known as the Economic or Business Entity Concept. This concept is fundamental in accounting as it establishes that the business is a separate legal entity from its owners. It allows for the business to maintain its own financial records and obligations independently of the individuals who own or manage it.

By applying this principle, businesses can accurately assess their financial position and results of operations without the distortion that might arise from including the personal financial information of their owners. This separation is crucial for various reasons, including legal protection, accurate tax reporting, and enhanced clarity in financial reporting.

The other principles mentioned do not serve the same function. The Materiality Concept focuses on the significance of information and its impact on decision-making and does not address the separation of personal and business finances. The Prudence Concept encourages caution in financial reporting, ensuring that assets and income are not overstated, while liabilities and expenses are not understated, but it does not concern itself with the separation of business and personal entities. The Accruals Concept involves recognizing revenues and expenses when they occur, irrespective of cash transactions, but again, it does not relate to the separation of business and personal assets