ENTITY THEORY Definition

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ENTITY THEORY is where a legal entity is regarded as having a separate existence from the owners. The financial statements are prepared from the perspective of the entity, not its owners. See PROPRIETARY THEORY.

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HARD COSTS is the purchase price of actual assets. For example, the purchase price of a new printing press would be the hard cost. The soft costs are additional fees for items like factoring-invoiced installation, prepaid and extended warranties, or service contracts for the new equipment.

CONDITIONAL SALES CONTRACT is a credit contract used for the purchase of equipment where the purchaser doesnt receive title of the equipment until the amount specified in the contract has been paid in full.

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