Question

Compare contrast entity theory and proprietary theory

Answer 1

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The proprietary theory and the entity theory are both accounting theories that explain the methodology for individual or business budgeting. The theories offer a way to calculate what the value of individual goods and services along with the financial value of the overall business or person. Both theories state that accounting is required for businesses to understand their profits and losses. Accounting includes recording the financial value of all assets and liabilities of a business or individual on financial statements. The proprietary theory and entity theory are important to a business growth and planning because it gives the best method for the business in decision making of the cost of goods and services used.

The proprietary theory assesses the business as an extension of the owners and the theory believes that the business is not separate from its owners .


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