According to the entity concept
I.each unit must keep separate records.
II.each unit reports the results of operations separate and apart from owners.
III.every unit is liable for tax on its income.
IV.each unit is classified as one of two basic entity types.

Question

According to the entity concept
I.each unit must keep separate records.
II.each unit reports the results of operations separate and apart from owners.
III.every unit is liable for tax on its income.
IV.each unit is classified as one of two basic entity types.
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Quizplus · Accepted Answer

The entity concept states that each unit must keep separate records (I), report the results of operations separate and apart from owners (II), and can be classified as one of two basic entity types (IV) - either a separate legal entity or a flow-through entity. While the entity concept does not necessarily dictate that every unit is liable for tax on its income, it is generally true that each entity is taxed separately (not necessarily each unit within an entity). Therefore, statements I, II, and IV are correct, making answer choice E the best option.

According to the Entity Concept