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 Shouldn't Be Banned"? Get an Original Essay The business entity concept, also known as the separate entity concept and economic entity, states that the business and its owners are two different identifiable parts. In other words, only transactions that affect the company will be taken into account. All other events that do not affect the business are not recorded in accounting. Simply put, that is, accounting entries are made from the point of view of the enterprise and not from the point of view of the owners. The only time the owner's personal resources affect a business' accounting records is when they introduce new capital into the business or take withdrawals from it. This requires the use of separate accounting records that completely exclude the assets and liabilities of any other business entity or owner. This concept is very important because if a company's transactions get mixed up with its owners' transactions, it may lose the usability of the information. Businesses are organized in many forms such as sole proprietorships, partnerships, corporations, corporations etc. Although they differ in the level of control exercised by the owners, all of the above business forms maintain separate records for those of the owners and the business separately. Therefore, even if a law does not recognize the business and its owners as two separate entities, the concept of a business entity is applicable to all types of businesses. This concept plays a key role in budget preparation. It allows accountants to examine businesses separately regardless of their ownership status. It is a guideline that each transaction must be assigned to a single entity. The concept of business entity is essential to separately measure the company's performance in terms of profitability and flows of cash. Helps in evaluating the financial position of the company on a particular date plan. Convenient for checking company records. This concept ensures that each company is taxed separately. To determine the amounts of payments to various owners upon liquidation of the business. From a liability perspective, to ascertain the resources available in the event of a legal judgment against the business entity. Please note: this is just an example. Get a custom paper from our expert writers now. Get a custom essay Ability to compare its financial performance with that of other companies in the industry.