Accounting entity - accounting principle, Financial Management

Assignment Help:

Accounting Entity - Accounting Principle

For accounting reasons it is suppose that business has separate existence and its entity is different from that of its owner(s). In simple term this means in which the liabilities and assets of the business are not the liabilities and assets of the owner of the business.

Accounting is completed for the business entities as distinguished is completed for the business entities as distinguished from the persons related with these entities; as such the transactions of the business and those of the owners should be accounted for and reported separately.  A business enterprise is an economic unit separate and apart from the owners. Every transaction should be analysed from the point of view of a business enterprise and not that of persons who are associated with it. For example when the owner introduces cash in business, this cash is shown as Capital Liability of the business towards the owner. The introduction or withdrawal of cash does not affect the overall cash (personal plus business) position of the owner. This concept enables recording of transactions between business and its owner.

This concept ensures that accounting records reflect only the activities of the business and the expenses related to common resources used for business and personal use and apportioned on some equitable basis between business and its owners. This concept applies to all form of business enterprises e.g. sole proprietorship, partnership and joint stock companies. However, the separate existence of business entity is recognized by law only in case of corporate form of enterprise, for sole proprietorship and partnership firms the law does not distinguish the owners and business separately.  Hence in legal sense the owners and business may not be different for some form of business enterprise, but for accounting purpose the business and the owners would be always treated separately.


Related Discussions:- Accounting entity - accounting principle

Find the profit earned by firm in equilibrium, Suppose that Harry and Steve...

Suppose that Harry and Steven make their living selling contraband at opposite ends of a town that is 1 mile long. Because it's a crowded city, the citizens use taxi-cabs for trans

Treasury notes or t-notes, Treasury Notes or T-notes are the securiti...

Treasury Notes or T-notes are the securities issued with maturities of more than one year and but not more than 10 years. All these securities are coupon securiti

Solution to shareholders versus managers conflict, Solutions to this Confli...

Solutions to this Conflict In common, to make sure that managers act to the best interest of shareholders, the firm will: (a) Acquire Agency Costs in the form of:

Eurobond, Eurobond A corporate bond denominated in U.S. dollars or oth...

Eurobond A corporate bond denominated in U.S. dollars or other hard currencies and sold to investors outside the country whose currency is used. Eurobonds have become an impor

Features of treasury bills, Features of Treasury Bills Treasury Bills a...

Features of Treasury Bills Treasury Bills are short-term, rupee denominations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. T-bills are issued

Chi square test as a test of independence, Chi Square Test as a Test of Ind...

Chi Square Test as a Test of Independence In real life decision making, managers often have to know whether the differences between the proportions observed from a number of sa

Managerial finance functions, Managerial Finance Functions Need skilful...

Managerial Finance Functions Need skilful planning, control and execution of the financial activities. There are four significant managerial finance functions. These are as sho

Differentiate between systematic and unsystematic risk, QUESTION a) Dis...

QUESTION a) Discuss the importance of diversification in the context of stock markets using appropriate numerical illustrations. b) Mimine and Minush are two companies with

Show market risk in systematic risks, Market risk as that portion of total ...

Market risk as that portion of total variability of return caused by the alternating Forces of bull and bear markets. When the security index moves upward haltingly for a signifi

Explain the three kind’s non-financial incentives, Q. Explain the three kin...

Q. Explain the three kind’s non-financial incentives? Non-Financial incentives: Incentives which cannot be offered in terms of money are known as non-¬financial incentives. Ind

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd