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Financial Accounting Chapter 1 Notes

Financial Accounting Chapter 1 Notes - Financial Accounting...

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Financial Accounting Chapter 1 Notes A Business is an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers. Profits is 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. Three Types of Businesses Service Businesses provide services rather than products to customers (entertainment, transportation, financial services) Merchandising Businesses sell products they purchase from other businesses to customers. (Wal Mart, Best Buy) Manufacturing Businesses change basic inputs into products that are sold to individual customers (General Motor, Dell, Nike) Three Types of Business Organizations Proprietorship, owned by individual, small business, limited to individual financial resources Partnership, same as Proprietorship except that it is owned by 2 or more individuals, combines skills and resources of more than one person Corporation, organized under state or federal statutes as a separate legal taxable entity, includes ownership divided into shares of stock, sold to shareholders, able to obtain large amounts of resources by selling stock, used by large corporations Limited Liability Company (LLC), combines attributes of Partnership and Corporation in that it is organized as a corporation. However, LLC can elect to be taxed as a partnership, has tax and liability advantages to the owners.
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