Accounting is based on many assumptions. Among these concepts, business entity is a considerable concept. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get an Original Essay The business entity concept, also known as separate entity and economic entity concept, states that the business and its owners are two different identifiable parties. In other words, only operations that affect the business will be taken into account. All other events that do not affect the activity are not counted. In other words, accounting records are prepared from the point of view of the business and not from the point of view of the owners. The only time the owner's personal resources affect a business's accounting records is when he or she introduces new capital into the business. company, or remove drawings from it. This requires the use of separate accounting records that completely exclude the assets and liabilities of any other business entity or the owner. This concept is very important because if a company's transactions are mixed with the transactions of its owners, it can lose the usability of information. Businesses are organized in many forms such as sole proprietorships, partnerships, corporations, corporations, etc. Although they differ in terms of the level of control exercised by the owners, all of the above business forms maintain separate records for those of the owners and for the business separately. Therefore, even if a law does not recognize the business and its owners as two separate entities, the concept of business entity applies to all types of businesses. This concept plays a key role in the preparation of financial statements. Allows accountants to review businesses separately, regardless of ownership. status.It is a guideline that each transaction should be attributed to a single entity.The concept of business entity is essential to measure business performance in terms of profitability and cash flow separately. Helps to evaluate the financial position of the company on a particular date basis. Useful for checking company records. This concept ensures that each company is taxed separately. To determine the amounts of payments to different owners at the time of liquidation of the company. From a liability perspective, to verify the assets available in the event of a court judgment against the business entity.Keep in mind: this is just a sample.Get a custom document from our expert writers now. Get a personalized trial Opportunity to compare financial performance with other companies in the industry.