FA_Chapter1 - ACTG 1P11 CHAPTER 1: THE BUSINESS OF BUSINESS...

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ACTG 1P11 CHAPTER 1: THE BUSINESS OF BUSINESS Purpose of a business I. Textbook says: “to provide goods or services for the purpose of making a profit for its owner or owners” but is this sufficient? a. Doesn’t encompass not-for-profit organizations? b. Is this really the only purpose of a business? II. To start a business you need capital a. Capital comes from investors (owners) b. Capital comes from creditors (lenders) III. Businesses can be classified as a for-profit organization (enterprise) or a not-for-profit organization (formed solely to help people) a. A for-profit organization incurs expenses in order to generate revenue b. A not-for-profit organization generates revenue in order to allow it to incur expenses (necessary to carry out its mission) IV. Both types of organization are looking to generate VALUE – something people want and will pay/donate for V. Exhibit 1-1 (slide 4) The nature of business operations The operation of the business depends on what it is organized to do. I. There are four types of businesses a. Service organization – provides services (does something for you) rather than selling something b. Merchandising business – buys goods, adds value to them, then sells them to customers i. Wholesale merchandiser – buys goods, adds value, then sells them to other companies
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ii. Retail merchandiser – buys goods, adds value, then sells them to “final consumers” c. Manufacturer – makes the products it sells d. Financial services company – doesn’t make tangible products and doesn’t sell products made by other companies; deals in services related to money Ownership structure of a business I. Business ownership usually takes one of three forms a. Sole proprietorships i. Single person owns the business ii. Not separate from its owner in terms of responsibility and liability iii. The business is the owner and the owner is the business b. Partnerships i. Owned by two or more people ii. Similar to a sole proprietorship iii. Not separate from the owners in terms of responsibility and liability c. Corporations i. Legally separate and financially separate from the owners ii. Ownership in a corporation is divided into units called shares of capital stock iii. Owners are called shareholders or stockholders
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This note was uploaded on 11/04/2011 for the course ACTG 1P11 taught by Professor Nchasse during the Fall '11 term at Brock University, Canada.

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FA_Chapter1 - ACTG 1P11 CHAPTER 1: THE BUSINESS OF BUSINESS...

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