Question

1. Is it still possible to do accounting without an identifiable entity?

2. What is the economic entity assumption in accounting?

3. What is the most fundamental requirement in accounting?

4. Examples of separate record-keeping?

5. What is the main purpose of doing separate record-keeping?

6. What are the four most common types of business entities (ownership) and characteristics of each entity?

7. Are economic entity and legal entity same or different? Any example of it?

Answer 1

1. in accounting, the business owner and the business are two diffrent entities and for the business entity, a seperate set of accounting record is maintained. the organization entity should be engaged in clearly identifiable economic activities and its control and economic resources should be diffrent from its owners. therefore, for accounting, an identifiable entity is a must for accounting procedures.

2. economic entity assumption in accounting allows accountant to keep the identity of the business different from its owners so that the business transactions can be clearly distinguished from the personal transactions of the business owners.

3. the most fundamental requiremnt of accounting is the data or financial records from which the information is generated and the subsequent cash flow statement, income statement and balance sheet is prepared, which reflect the financial health of the company.

4. seperate record keeping in accounting means that the responsibility of the area in charge should be diffrent from the person recording it.

for example: the cashier, who collects the cash from the customers should not record the accounting entry for cash receipts in the accounting books of the company.

5. seperate record keeping eliminates the fraudlent activities as well as keeps a check on the transactions and keeps accuracy intact. as the transaction is processed from two seperate persons incharge.

6. types of business entities

a. public limited company

open to public for issuing shares but limited liability over the company's capital

b. private limited company

not open to public for shares issue, shares are issued privately but limited to company;s assets

c. joint venture company

when two companies amalgamate to form a new company

d. partnership firm

when two or more persons join hands to do business in various ownership ratios and contribute in capital or kind.

e. sole proprietorship

when a single company owns and operates the business and take alll relevant decisions by himself

f. NGO

non governement organisations are formed for some social purposes and their motto is not to earn profit rather aims at social welfare activities

7. any entity formed which accepts general accounting principles are economic entity example are hospitals, companies, federal agencies etc

but a company fromed that has legal rights and rresponsibilities and also whose affairs are regulated bu the corporation act are legal entities

example are any company, individual or organisation allowed by the authorized legal framework like law companies which have the right to make contracts, or responsibility to pay debts

thanks

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