Basics of Accounting:In accounting, a business or an organization and its owners are treated as two separately identifiable parties. This is called the entity concept. The business stands apart from other organizations as a separate economic unit. It is necessary to record the business's transactions separately, to distinguish them from the owners' personal transactions. This helps to give a correct determination of the true financial condition of the business. This concept can be extended to accounting separately for the various divisions of a business in order to ascertain the financial results for each division. Under the business entity concept, a business holds a separate entity and distinct from its owners. "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". The owner is treated as a creditor and the capital invested is regarded as a liability. It applies to all forms of business organizations. Thus, Both (A) and (R) are correct and (R) is the correct explanation of (A).