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Lesson 1: Introduction to Accounting and Business
Business Entities
A business entity is an organization that uses resources to provide services or goods to a consumer. The business entity is always treated separately from its owner(s), and each business entity has to have its own set of accounting records. All business entities (organizations) have a significant role to play in society and have multiple stakeholders to whom they are accountable.
Example 1.1
In this lesson we will analyze a transaction for a service company (MM TAX) and show how the results from the transactions are used to prepare the company’s financial statements.
MM TAX is a firm that provides tax services for clients. MM TAX will be organized as a corporation. M. McGruber is the only stockholder of the corporation. M. McGruber uses a computer (resource) to prepare tax returns that are filed by the client with the appropriate taxing authority. MM TAX is a business entity (corporation) that uses resources to provide a service.