Business entity concept
Business enterprise and owners are two separate independent entities, assume by this concept for accounting. So transactions for both are assumes separate. Any expenses incurred by owner for him or his family from business will be considered as expenses and it will be shown as drawings.
Significance of Business entity concept
Concept helps to find out profit of business as only business expenses.
Revenues are recorded separately.
Private and personal expenses are ignored.
Concept restraint accountant from recording of owner’s private/personal transactions.
It facilitates recording of business transactions from business point of view.
It is very basis of accounting concepts, conventions and principles.