QS Study

Accounting Entity Assumption states that a business is a divide legal entity from the proprietor. In the accounts, the business’ monetary transactions are recorded only.

According to this assumption, business is treated as a unit or entity separately from its owners, creditors and others. In other words, the owner of a company concern is constantly measured to be divide and distinct from the business which he controls. It states that a business is a financial entity unto itself. This means that the business has its own financial status, and its situation is separate from the finances of its owners, stockholders or employees. All the business transactions are recorded in the books of accounts from the viewpoint of the business. Even the owner is treated as a creditor to the level of his capital.