Basic Concepts in Accounting

Business Entity Concept:

According to this concept, the business is assumed to be a distinct entity from the persons who own the business E.g. if there is a partnership concern carrying the name of M/s. X, where Mr. A and Mr. B are partners, from accounting point view, M/s. X is supposed to be a separate entity from Mr. A and Mr. B. The financial statements prepared on the basis of accounting records relate to the business i.e. Mr X and not Mr. A and Mr. B individually. It should be noted in this connection that the business entity concept has nothing to do with the legal entity of the business. It applies to both corporate organisation (which by itself is a legal entity separate from the owners) as well as non-corporate organisation. (which is not a legal entity separate from the owners)