Accounting Entity

AAA

DEFINITION of 'Accounting Entity'

A clearly defined economics unit that is accounted for separately. An accounting entity can be either a business or subdivision of a business that engages in economic activities, has economic assets and resources that must be accounted, and is separate from the personal dealings of its owners. Once an accounting entity is determined, transactions within the specific unit are accounted. The entity should not be flexible or regularly changed, in order to insure the accuracy of accounting.

Also known as a "reporting entity".

INVESTOPEDIA EXPLAINS 'Accounting Entity'

Accounting entities are separated so that they can be focused in on by an accountant. This enables the accountant to record and report transactions that are specific to that entity. Once an entity is established, accountants are able to determine the cash flows and transactions that will impact the entity's financial statements.

RELATED TERMS
  1. Accounting

    The systematic and comprehensive recording of financial transactions ...
  2. Economics

    A social science that studies how individuals, governments, firms ...
  3. Accountant

    A professional person who performs accounting functions such ...
  4. Income Statement

    A financial statement that measures a company's financial performance ...
  5. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Fundamental Analysis

    Financial Footnotes: Start Reading The Fine Print

    Find out what could be hidden in this often-overlooked part of the financial statements.
  2. Fundamental Analysis

    Understanding Pro-Forma Earnings

    These figures can either shed light on a company's performance or skew it. Find out why.
  3. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  4. Markets

    Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.
  5. Options & Futures

    Core Earnings Strip Away "Creative" Accounting

    This metric is an attempt to counteract creative accounting, but it poses its own set of challenges.
  6. Budgeting

    Do I Need A Personal Accountant?

    You know you need to keep your personal finances better organized. Should you hire professional help, and if so what kind?
  7. Investing

    What's a Run Rate?

    Run rate is a term used to denote annualized earnings extrapolated from a shorter time frame. Management uses the run rate to estimate future revenues.
  8. Professionals

    Financial Accounting

    Financial accounting is the process of gathering, recording, summarizing and reporting financial data relating to a business. The ultimate goal is to accurately report the financial picture and ...
  9. Investing

    What are Direct Costs?

    Direct costs for finished goods refer to the items and services directly used in production. Other costs such as rent and insurance for the production site are indirect costs. These costs may ...
  10. Investing

    What is Contingent Liability?

    A contingent liability is an amount that might have to be paid in the future, but there are still unresolved matters that make it only a possibility. Lawsuits and the threat of lawsuits are the ...

You May Also Like

Hot Definitions
  1. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage.
  2. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  3. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  4. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
Trading Center