What Is an Entity Assumption?

A business is an individual independent of its owner and other businesses. The reason for this assumption is that differentiating the accounting information of different companies helps to make better decisions. Business entities can exist in three legal forms: proprietor-ship, partnership, and company.

Accounting entity hypothesis

Right!

A business is an individual independent of its owner and other businesses. The reason for this assumption is that differentiating the accounting information of different companies helps to make better decisions. Business entities can exist in three legal forms: proprietor-ship, partnership, and company.

It means that the accounting should be based on the various economic transactions that the enterprise takes to record and reflect the various economic activities of the enterprise itself, and clarify the scope of the accounting work ^[1]

In the era of traditional industrial economy,

1. Have a certain amount of funds.

2. Carry out independent production and operation activities and other activities.

3. Independent accounting is implemented in accounting. ^[2]

All economic theories are sourced and serviced in economic practical activities, and change with changes in the economic environment.

The accounting entity hypothesis is to clarify the spatial scope of accounting

Mainly manifested in our country,

Correct

Accounting information comes from inside and outside the scope of the accounting entity. From the technical conditions, subjective will, and objective environment of the enterprise, it is impossible to provide comprehensive information. However, in the context of increasingly fierce market changes, in order to avoid and reduce business risks as much as possible and improve economic returns, companies and other users of reports will not only need information from the past, but also information from the future. In order to meet these increasingly urgent information needs, accountants must break through traditional accounting entities and extend the accounting entities outside the enterprise to obtain the required information smoothly. The new environment requires us to transform the subjective view of the enterprise into the subjective view of those who need information.

With the emergence of a new economic form such as the network economy, the industry has opened up new areas of accounting, including bankruptcy accounting, human resources accounting, and social accounting. They need the innovation of accounting hypothesis theory to develop better. For example, bankruptcy accounting requires the liquidation team to act as the accounting subject qualification for the bankruptcy enterprise; social accounting needs to upgrade the pure accounting subject to the entire national economic subject. These new challenges suggest that we should enrich the content of accounting entity assumptions, from enterprises and institutions to the economic system environment.