Why Is Understanding What Type of Legal Entity a Business

question 1

Multiple Choice

Why is understanding what type of legal entity a business uses important when initially setting up an accounting system?

• A)Legal entity dictates what types of reports a business must use to make informed beneficial internal decisions; therefore,the accounting systems is set up to support the need to make the most beneficial internal decisions.
• B)Legal entity has very little impact on what tax form a business uses,therefore,it is really not of great importance when setting up an accounting system.
• C)A company's type of legal entity impacts the equity accounts and the tax form a business files.The tax form a business files greatly impacts the type of financial information an accounting system must track.
• D)A company's type of legal entity is relatively fluid and changes often.An accounting system must be able to respond to these changes from year to year.

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Definitions:

Dependent Variable

In research, it's the variable that is tested and measured, often to see the effects of variations in the independent variable.

Researcher's Manipulation

The deliberate alteration of variables by a researcher in an experiment to determine cause and effect relationships.

Independent Variable

A variable that is manipulated or changed in an experiment to determine its effect on a dependent variable.

Dependent Variable

In an experimental setting, the variable that is being tested and measured, which is expected to change as a result of manipulations in the independent variable.