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Chapter_1 - Chapter 1 Introduction to Accounting and...

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Chapter 1: Introduction to Accounting and Business Business : is an organization in which basic resources such as materials and labor are assembled and processed to provide goods and services to customers. Profit : Are the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services. -some business operates for other goals than profit Types of Business : Merchandising – sell products to customers. Manufacturing - change basic inputs into products that are sold to individual customers. Service – provide services rather than products to customers. Types of Business Organization: Proprietorship – is owned by one individual Comprises 70% of business organizations in US Cost of organizing is low Limited financial resources Used by small business Partnership – is owned by two or more individuals. Comprises 10% of business organizations in the US Combines the skills and resources of more than one person Prepared by: Maria Mari Fall, 2007 Page 1 of 11 1
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Chapter 1: Introduction to Accounting and Business Corporation – is organized under state or federal statutes as a separate legal entity. Generates 90% of the total dollars of business receipted Comprises 20% of the business organizations Includes ownership divided into shares of stock Used by large businesses Ability to obtain large amounts of capital Limited liability corporation (LLC) Combines the attributes of a partnership and a corporation I that it is organized as a corporation. Can elect to be taxed as a partnership Popular alternative to a partnership Has tax and liability advantages to the owners Business Stakeholders: Is a person or entity that has an interest in the economics performance of the business. Owners who have invested resources in the business clearly have an interest in how well the business performs. Managers are those individuals who the owners have authorized to operate the business. Employees provide services to the business in exchange for their pay. Customers, government, and creditor s also have a stake in the success of the business Capital market stakeholders provide the major financing for the business in order for the business to begin and continue its operations Prepared by: Maria Mari Fall, 2007 Page 2 of 11 2
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Chapter 1: Introduction to Accounting and Business Product or service market stakeholders –
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