Which of the Following Statements Is an Accurate Description of the Difference

question 76

Multiple Choice

Which of the following statements is an accurate description of the difference between a legal entity and an economic entity?

• A) An economic entity is one that combines one or more legal entities with synergy such that they each make higher returns than they would individually. If an entity ceases to effectively produce increased returns in this way it becomes uneconomic. A legal entity is one that is recognised in law as having a separate existence from its owners.
• B) A legal entity is one that uses appropriate corporate governance measures to ensure that it abides by legislative requirements and other legal regulations. An economic entity may span more than one legal entity, but is not a legal entity in itself.
• C) An economic entity is one that is formed for the purpose of generating a profit and therefore a return to owners. A legal entity is one that is circumscribed by legal constitution or accounting standards as constituting a reporting entity.
• D) A legal entity refers to an entity that has its own particular legal status such as a company, trust or partnership. The concept of an economic entity emphasises substance over legal form. It may operate as a coordinated entity and contain more than one legal entity.