What does the entity concept in accounting state?

The entity concept in accounting states that the financial results of an economic entity should be reported separately. This principle underlies the importance of maintaining distinct boundaries between different organizations and individual owners for accounting purposes. It ensures that the financial activities and performance of each entity are tracked independently, which provides clarity and accountability in financial reporting.

By emphasizing that entities operate independently, the entity concept allows stakeholders – such as investors, creditors, and management – to assess the financial health and operational efficiency of each entity in isolation. This separation is crucial for making informed decisions, as it prevents the mixing of personal finances with business finances, ultimately promoting transparency and enhancing the reliability of financial statements. Thus, option B captures the essence of the entity concept accurately.