explain business entity concept
Answers
In Accounting,Business Entity Concept states that in any business organisation,the commercial or business related transactions should be separated from other personal transactions of the owner or transactions pertaining to other external businesses.
Explanation:
According to Business Entity Concept,while preparing any official accounting record,the respective transactions that are exclusively related to business should be categorized as business related or commercial and the ones that are related to owner's personal matters or related to any external owner should be identified as personal and separately recorded in the accounting book.In this context,all the assets and liabilities of the company or the organisation are also divided accordingly.The business entity concept is basically used in recording accounting entries because otherwise,multiple transactions of different categories will be mixed and will result in unnecessary confusions.It will later create complications while reporting the accounting records for tax and other financial purposes.