Economic entity

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In accounting, an economic entity is one of the assumptions made in generally accepted accounting principles. Basically, any organization or unit in society can be an economic entity.

Examples of economic entities are hospitals, companies, municipalities, and federal agencies.

The "Economic Entity Assumption" says that the activities of the entity are to be kept separate from the activities of its owner and all other economic entities.

The business is accounted for separately from other business entities, including its owner. This distinction allows recording and analysis of transactions that take place between the business and its' owners. An owner is a separate entity with an equity claim upon the business. Creditors (with debt claims on the business) make up the remainder of the right-hand side of the balance sheet.


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