The article focuses on the entity concept in accounting. Of necessity accounting is practiced within a framework of basic assumptions. These condition in various manner the resulting product. Holding primary rank in the framework of assumptions is the view that the business undertaking is an entity. As commonly set forth the entity view holds the business enterprise to be an institution in its own right, separate and distinct from the parties who furnish the funds, which make possible its operation. Strongest support for the institution in its own right assumption is held to exist in the case of the corporation to which the state grants the right to hold legal title to property, which the state taxes as an individual, and which holds the legal right to sue or be sued. The accounting concept of entity does not wholly rest upon the existence of legal entity, however. The entity point of view is held to be equally applicable to sole proprietorships and partnerships which lack the characteristic of legal entity. In the case of consolidated statements, also, the entity whose status and whose success or failure are depicted is an economic entity whose scope often encompasses numerous separate legal entities.

The desire to use only objectively recorded figures has had great influence in the development of the rationalized modifications. To accomplish adjustment of the income measurement what appears to be needed under currently accepted accounting thinking is ingenious argument supporting manipulation of the use made of recorded figures. When in the twenties and thirties management in response to pressures, endeavored to reflect on the books and in the statements the replacement values of assets, the accountant, to say the least, was disturbed. In the current experience, although he prides himself that he is maintaining traditional appearances, the accountant has to considerable extent capitulated. The capitulation, however, is subtle in that it is accomplished through modification of the older procedures, within the overall cost process. it is now said that accounting is a historical process but the history which the statements summarize is a rationalized history and not the history of the items and the events which the statements are intended to depict.