accounting entity (reporting entity)
Definition
The unit for which accounting records are maintained and for which financial statements are prepared. The accounting entity concept (or entity concept or separate entity concept) is the principle that financial records are prepared for a distinct unit or entity regarded as separate from the individuals that own it.
Example
Example 1:
Ade runs a provision store in Ibadan as a sole trader, even though he owns the business personally, his accountant prepares separate books for the store as its own accounting entity, keeping business transactions completely separate from Ade’s personal spending.
Example 2:
Although Elon Musk personally owns a significant share of Tesla, Tesla’s financial statements are prepared as a completely separate accounting entity, his personal wealth and spending have absolutely no place in Tesla’s corporate accounts.