Chapter One

Chapter One - FINANCIAL STATEMENT CHAPTER ONE FORMS OF A...

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FINANCIAL STATEMENT CHAPTER ONE FORMS OF A BUSINESS SOLE PROPRIETORSHIP: owned by one person. ADVANTAGES DISADVANTAGES - Simple to establish - Proprietor personally liable - Owner controlled - Financing may be difficult - Tax advantages - Transfer to ownership may be difficult PARTNERSHIP: business owned by two or more people. ADVANTAGES DISADVANTGES - Simple to establish - Partners personally liable - Shared control - Transfer of ownership may be difficult - Tax advantages - Broader skills and resources CORPORATION: separate legal entity owned by stockholders. ADVANTAGES DISADVANTAGES - Easy to transfer ownership - Unfavorable tax treatment - Greater capital raising potential - Lower legal liability IDENTIFY THE USERS AND USES OF ACCOUNTING INFORMATION Users of financial information fall into two categories: internal and external users. Accounting is the information system that identifies, records, and communicates economic events to interested users. Internal users are within the organization. -managers who plan organize, and run the business. Finance: Is cash sufficient to pay dividends to stockholders? HR: Can we afford to give employees pay raises this year? Marketing: What price will maximize the company’s net income? Management: Which product line is the most profitable? Should any other product lines be eliminated? External users are whom are outside the organization. Investors: Earning satisfactory income? Compare in size and profitability? Creditors: Will we be able to pay its debts as they come due? Ethics in Financial Reporting
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This note was uploaded on 10/18/2010 for the course ACCT 210 taught by Professor Degaetano during the Fall '10 term at Montclair.

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Chapter One - FINANCIAL STATEMENT CHAPTER ONE FORMS OF A...

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