The business entity concept is an accounting principle that treats a business or organization and its owners as two separate parties. This means that the business is considered a separate economic unit and its transactions must be recorded separately from those of its owners or other businesses. The concept is necessary to give a correct determination of the true financial condition of the business and to ascertain the financial results for each division of a business. The business entity concept is important for a variety of reasons, including the need to separately track taxes, financial performance, and financial position for each entity. The most common types of business entities are sole proprietorships, partnerships, corporations, and government entities. The principles of double-entry accounting apply to all forms of business organization, as well as not-for-profit organizations. The business entity concept is needed from a liability perspective, to ascertain the assets available in the event of a legal judgment against a business entity.