Question

What is the difference between the Entity approach and the Aggregate approach?

1) The Entity approach treats the entity separate from the owners, while the Aggregate approach treats the entity as an aggregation of owner's interests.
2) The Entity approach treats the entity as an aggregation of owner's interests, while the Aggregate approach treats the entity separate from the owners.
3) The Entity approach and the Aggregate approach both treat the entity separate from the owners.
4) The Entity approach and the Aggregate approach both treat the entity as an aggregation of owner's interests.

Answer 1

The Entity approach considers a business as a separate legal entity distinct from its owners, whereas the Aggregate approach views the business as directly connected to the owners' interests.

Step-by-step explanation:

The difference between the Entity approach and the Aggregate approach is primarily in how the business entity is viewed in relation to its owners. The correct answer to the question is: The Entity approach treats the entity separate from the owners, while the Aggregate approach treats the entity as an aggregation of owner's interests. This means that under the Entity approach, the business is considered to have its own distinct legal personality that is separate from the interests and assets of the owners, commonly applied in corporate law. Conversely, the Aggregate approach views the business as a collection of individual participants' interests, which is often the perspective adopted in partnerships where the firm's assets and liabilities are directly linked to the owners.