CH 1 notes - Ch 1 Notes Accounting is the language of...

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Ch 1 Notes Accounting is the language of business 3 forms of business organization 1. Sole Proprietorship –one sole owner and business worker 2. Partnership – 2 or more owners working together 3. Corporation – large firms and companies a. Separate legal and accounting entity. The company is treated as a separate individual. You can't sue the owner, have to sue the company. Purpose of firms/companies – To make a profit (earning more than expenses) -Company has to be able to show that it is able to make a profit. -Use financial statements/reports to tell investors/customers/predators how successful it is. Tells about financial activities. 4 Types of Financial Statements: 1. Income Statement – tells the income of the company (profitablility). Reports the revenues/expenses. (Revenue – Expense = Net Income) a. Revenue is the amount earned from sale of goods/services. b. Expenses are the costs of the activities 2. Statement of Retained Earning (states 2 things) how much net income is retained in the company.
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