The Entity Concept in Accounting.

Abstract The article focuses on the entity concept in accounting. Of necessity accounting is practiced within a framework of basic assumptions. These condition in various manner the resulting product. Holding primary rank in the framework of assumptions is the view that the business undertaking is an entity. As commonly set forth the entity view holds the business enterprise to be an institution in its own right, separate and distinct from the parties who furnish the funds, which make possible its operation. Strongest support for the institution in its own right assumption is held to exist in the case of the corporation to which the state grants the right to hold legal title to property, which the state taxes as an individual, and which holds the legal right to sue or be sued. The accounting concept of entity does not wholly rest upon the existence of legal entity, however. The entity point of view is held to be equally applicable to sole proprietorships and partnerships which lack the characteristic of legal entity. In the case of consolidated statements, also, the entity whose status and whose success or failure are depicted is an economic entity whose scope often encompasses numerous separate legal entities.