Business entity concept

Business entity concept treats the business owner as totally a separate and distinct entity from the business. In other words, "Owner of the business and business itself is different". The fund which is brought inside the firm by the proprietor, at the commencement of the business is known as capital.

Assets= Liabilities + Capital

The above accounting equation is an expression of the business entity concept because it shows that the business itself owns the assets and in turn owes the various applicants. Therefore, The amount of the capital, which was initially invested should be returned to the owner considered as due to the owner; who was nothing but the contributory of the capital.