In the , the transactions or expenses of the business owner and the business should be kept separate to avoid confusion when reviewing the books.
The concept of entity is one of the concepts most studied by accountants. It is a useful concept used to avoid confusion between the business owner’s personal accounts and your business.
In this financial situation, the accountant must separate the assets and liabilities engaged in business activities as assets and liabilities of the entity.
Without this concept, the records of several entities would be intermingled and it would be difficult to distinguish the taxable results of a single company.
Thus, each business entity is taxed separately, which is necessary to determine the financial performance and prosperity of a single agency.