Chapter 1slides - Chapter1 Accounting Sole Proprietorship...

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Chapter 1 Business Decision and Financial  Accounting
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Business Organizations Sole Proprietorship Partnership Corporation
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Organizations Characteristic Proprietorship Business entity yes Legal entity no Limited liability no Unlimited life no Business taxed no One owner allowed yes
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Organizations Characteristic Proprietorship Partnership Business entity yes yes Legal entity no no Limited liability no no Unlimited life no no Business taxed no no One owner allowed yes no
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Organizations Characteristic Proprietorship Partnership Corporation Business entity yes yes yes Legal entity no no yes Limited liability no no yes Unlimited life no no yes Business taxed no no yes One owner allowed yes no yes Test: David and Mike own a financial service company. Neither David nor Mike has personal responsibility for the debts of their company
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Definitions G enerally  a ccepted  a ccounting  p rinciples      GAAP Accounting rules used to prepare, present,  and report financial statements for publicly- traded companies and many privately-held  companies  (Wikipedia) One of the key elements of the institutional  framework for financial accounting in the U.S.
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 The Four Basic Financial  Statements Income Statement Balance Sheet Statement of Cash Flows Statement of Retained Earnings Financial statements summarize the financial activities of the  business.
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MAXIDRIVE CORP. Balance Sheet At December 31, 2006 (in thousands of dollars) Assets Cash 4,895 $ Accounts receivable 5,714 Inventories 8,517 Plant and equipment 7,154 Land 981 Total assets 27,261 $ Liabilities and Stockholders' Equity Liabilities Accounts payable 7,156 $ Notes payable 9,000 Total liabilities 16,156 $ Stockholders' Equity Contributed capital 2,000 $ Retained earnings 9,105 Total stockholders' equity 11,105 Total liabilities and stockholders' equity 27,261 $ 1. Name of entity 2. Title of statement 3. Specific date 4. Unit of measure The Balance Sheet reports the financial position of an entity at a particular point in time.
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MAXIDRIVE CORP. Balance Sheet At December 31, 2006 (in thousands of dollars) Assets Cash 4,895 $ Accounts receivable 5,714 Inventories 8,517 Plant and equipment 7,154 Land 981 Total assets 27,261 $ Liabilities and Stockholders' Equity Liabilities Accounts payable 7,156 $ Notes payable 9,000 Total liabilities 16,156 $ Stockholders' Equity Contributed capital 2,000 $ Retained earnings 9,105 Total stockholders' equity 11,105 Total liabilities and stockholders' equity 27,261 $ Assets are listed Assets are listed by their ease of by their ease of conversion into conversion into cash. cash. Cash Amount of cash in the company’s bank accounts. Accounts receivable Amounts owed by customers from prior sales. Inventories Parts and completed but unsold products. Plant and equipment Factories and production machinery.
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