What concept in accounting states that an organization is viewed as a separate entity?

The Entity Concept in accounting asserts that a business is treated as a distinct entity, separate from its owners or stakeholders. This principle allows for clear financial reporting and accountability, as it delineates the business's financial matters from the personal finances of its owners. By recognizing the organization as its own entity, transactions involving the business can be accurately tracked, financial statements can be prepared effectively, and tax obligations can be determined appropriately.

Understanding this concept is fundamental in accounting as it ensures that the business's assets, liabilities, and equity are reported independently from those of its owners, fostering transparency and clarity in financial dealings. This clarity is crucial for investors, creditors, and regulatory agencies, as it provides a true picture of the company's financial health and operational results.

The other concepts listed, while important in their own right, do not specifically address the separation of the entity from its owners. The Cost Principle relates to accounting for assets at their initial purchasing price, the Reliability Concept ensures that the information in financial reports is truthful and dependable, and the Going-Concern Concept presumes that a business will continue to operate indefinitely unless stated otherwise. Each serves a different purpose within the framework of accounting, but the Entity Concept is particularly focused on the distinct identity of the organization as