formofbusinessroleofaccountingACC200

formofbusinessroleofaccountingACC200 - Objectives –...

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Unformatted text preview: Objectives – Selecting a Form of Business Ownership and the Role of Accounting in Business Contrast the sole proprietorship, partnership (general and limited) corporate (C-corp and S-corp), and limited liability (LLC and LLP) forms of business ownership Describe the advantages and disadvantages of the sole proprietorship, partnership, corporate and limited liability (LLP and LLC) forms of business ownership Contrast the tax treatment of the sole proprietorship, partnership, C-corporation, S-corporation, and LLC forms of business ownership Describe the three business activities of financing, investing and operating Objectives – Selecting a Form of Business Ownership and the Role of Accounting in Business Define accounting and its role in business, Describe and illustrate the basic financial statements and how they interrelate Define assets, liabilities, owners’ equity, revenue and expense and understand their relationship to the financial statements Describe the basic accounting concepts underlying financial reporting including the monetary unit assumption, time period assumption, going concern assumption, cost principle, and full disclosure principle OBJECTIVE OF BUSINESS To Provide products or services that are valued in the market place TYPES OF BUSINESSES Manufacturing Merchandising Service Forms of Business Organizations Sole Proprietorship Partnership General Limited Corporation S-Corporation C-Corporation Limited Liability Companies LLC LLP Factors to Consider When Selecting Form of Business Profit Sharing Taxation Control Creation Liability Funding BUSINESS STRATEGIES Cost Leader Differentiation MANAGEMENT DECISION CYCLE FUNDING FINANCING DECISIONS INVESTING DECISIONS OPERATING PROFIT INVESTMENTS OPERATING DECISIONS FINANCING DECISIONS Investment by Investment Owners Owners Investment by Investment Others Others Loans from Loans Creditors Creditors Business Capital INVESTING AND OPERATING DECISIONS Purchase land, buildings, and equipment Purchase materials and supplies Pay employees Pay other expenses Business Capital OPERATING DECISIONS Purchase land, Purchase buildings, and equipment equipment Purchase materials and Purchase supplies supplies Pay employees Pay other expenses Produce and Sell goods and services goods ACCOUNTING INFORMATION SYSTEM Financial Accounting Subsystem Accounting Subsystem Information Reported to External Users Management Tax Information Reported to Internal Users Accounting Subsystem Accounting Subsystem Information Reported to Taxing Authorities Regulatory Information Reported to Regulatory Agencies USERS OF ACCOUNTING INFORMATION External Users Stockholders Creditors Government Customers Vendors (Suppliers) Internal Users Managers Employees FINANCIAL STATEMENTS Statement of Income (Earnings) Statement of Cash Flows Statement of Retained Earnings (Stockholders’ Equity) Statement of Financial Position (Balance Sheet) Notes Notes Are Explanatory Information Considered an Integral Part of the Financial Statements Notes Provide Vital Information That Cannot Be Conveyed by the Financial Statements Themselves ACCOUNTING EQUATION Assets = Liabilities + Owner’s (Shareholders’) Equity Owner’s (Shareholers’) Equity = Contributed Capital + Retained Earnings Retained Earnings = Revenues – Expenses - Dividends RELATIONSHIP OF FINANCIAL STATEMENTS Balance Sheet, 2008 Assets: Assets: Cash..............$ 10,000 Cash..............$ 10,000 Other Assets.. 100,000 Other 100,000 Total............$110,000 Total............$110,000 Liabilities and Equity: Liabilities.......$ 30,000 Capital Stock.. 60,000 Ret. Earnings.. 20,000 Ret. 20,000 Total...........$110,000 Total...........$110,000 Statement of Cash Flows, 2009 Net Cash - Operations... $150,000 Net Net Cash - Investing...... (135,000) Net Cash - Financing..... 20,000 Net Net increase in Cash...... $ 35,000 Beginning Cash.............. $ 10,000 Beginning 10,000 Ending Cash................... $ 45,000 Statement of Statement Retained Earnings, 2009 Beg. Ret. Earnings........ $ 20,000 20,000 Net Income................... 40,000 Dividends....................... (15,000) Dividends....................... Ending Ret. Earnings.... $ 45,000 RELATIONSHIP OF FINANCIAL STATEMENTS Income Statement,2009 Income Revenues...... $120,000 Expenses....... (80,000) Expenses....... Net Income.... $ 40,000 Net 40,000 Statement of Statement of Retained Earnings, 2009 Beg. Ret. Earnings......... $ 20,000 Beg. Net Income..................... 40,000 Net 40,000 Dividends........................ (15,000) Dividends........................ (15,000) Ending Ret. Earnings..... $ 45,000 RELATIONSHIP OF FINANCIAL STATEMENTS Statement of Cash Flows, 2009 Net Cash - Operations... $150,000 Net Net Cash - Investing...... (135,000) Net Cash - Financing..... 20,000 Net Net increase in Cash..... $ 35,000 Beginning Cash............. $ 10,000 Beginning 10,000 Ending Cash.................. $ 45,000 Ending 45,000 Statement of Statement Retained Earnings, 2009 Beg. Ret. Earnings........ $ 20,000 Beg. Net Income.................... 40,000 Dividends....................... (15,000) Dividends....................... (15,000) Ending Ret. Earnings.... $ 45,000 Ending 45,000 Balance Sheet, 2009 Assets: Assets Cash.............. $ 45,000 Cash.............. 45,000 Other Assets.. 100,000 Other 100,000 Total......... $145,000 Total......... Liabilities and Equity: Liabilities........ $ 25,000 Capital Stock.. 75,000 Ret. Earnings.. 45,000 Ret. 45,000 Total... $145,000 ACCOUNTING CONCEPTS Monetary Unit Assumption Economic Entity Assumption Time Period Assumption Going Concern Assumption Cost Principle Matching Principle Full Disclosure Principle ...
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This note was uploaded on 04/21/2009 for the course ACC 200 taught by Professor Buckless during the Spring '08 term at N.C. State.

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