How are your financial and budgetary activities and a business alike under the single economic entity concept?
A single economic entity concept refers to companies that are associated with each other by a virtue of common control to operate in the form of a single economic unit and thus consolidated financial statements of the group of companies should reflect the essence and existence of such kind of arrangements(Hove, 2011). That is, consolidated financial statements give a combination of the financial statements of the separate legal entities under the control of a parent company into a single set of financial statements reflecting the financial status of the entire group of companies.
The financial and budgetary activities and a business are alike under the single economic entity concept since the aspect of the consolidated financial statements give a presentation of an aggregate overview of the financial position of a parent and its subsidiaries. This financial position overview helps in gauging the general health of an entire group of business entities unlike a stand-alone position of a single business (Porter& Norton, 2009).
The information from the financial and budgetary activities and a business under the single economic entity concept are alike because the consolidated financial statements for a group of companies must be prepared to depict that the entire group constitutes just a single entity so that it can avoid any form of misrepresentation of the scale of the activities of the group.
The consolidated financial statements show the financial results and position of operations for the parent (the controlling entity) and more or just a single subsidiary (controlled entities) as if the individual entities were actually a single entity or company.
The understanding of the single economic entity concept ensures that each of the adjustments required in the preparation of the consolidated statements should focus on: First, is the identification of the treatment accorded to a particular item by each of the separate entities (Hove, 2011). Secondly, is the identification of the amount which would feature in the financial statements with respect to the specific item in case the consolidated entity were actually a single company.