ACCOUNTING ENTITY ASSUMPTION Definition

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ACCOUNTING ENTITY ASSUMPTION states that a business is a separate legal entity from the owner. In the accounts the business' monetary transactions are recorded only.

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FINANCIAL VIABILITY is the ability of an entity to continue to achieve its operating objectives and fulfill its mission over the long term.

CAPITAL MAINTENANCE contains two concepts, a financial concept and a physical concept. Most entities adopt a financial concept of capital maintenance. Under this concept a profit is earned only if the monetary amount of net assets at the end of the period, excluding distributions/contributions to/from owners, exceeds the monetary amount of net assets at the beginning of the period. Financial capital maintenance is usually measured in monetary units; however, the requirement to report the impact of hyperinflation results in the measurement of assets and liabilities in monetary units of constant purchasing power.

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