Entity Concept,Accounting concepts.

(a) Entity concept: Entity concept states that business enterprise is a separate identity apart from its owner.
Accountants should treat a business as distinct from its owner. Business transactions are recorded in the
business books of accounts and owner’s transactions in his personal books of accounts. The practice of
distinguishing the a airs of the business from the personal a airs of the owners originated only in the
early days of the double-entry book-keeping. This concept helps in keeping business a airs free from
the in uence of the personal a airs of the owner. This basic concept is applied to all the organizations
whether sole proprietorship or partnership or corporate entities.
Entity concept means that the enterprise is liable to the owner for capital investment made by the
owner. Since the owner invested capital, which is also called risk capital, he has claim on the pro t
of the enterprise. A portion of pro t which is apportioned to the owner and is immediately payable
becomes current liability in the case of corporate entities.

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