Notes Chapter 1

Notes Chapter 1 - Notes Chapter 1 I. Business Entities a....

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Notes Chapter 1 I. Business Entities a. Sole proprietorship- one owner; simple to set up, total control, single tax, total liability b. Partnership- two or more owners; pretty easy to set up, single tax, shared liability, if anything happens to one partner, partnership ends. c. Corporation-Many owners in form of shareholders; easy to sell stock, double tax, no personal liability. II. The purpose of financial information is to provide inputs for decision making. a. Accounting- identifies, records, and communicates the economic events of an organization to interested users. a.i. Internal users- managers who plan, organize, and run a business a.i.1. Marketing managers, production supervisors, finance directors, company officers a.ii. External users- investors (owners choose to buy or sell) and creditors (suppliers and bankers evaluate their risks when granting credit or lending money) a.ii.1. Taxing authorities (Internal Revenue Service), Customers, Labor unions, Regulatory Agencies III. Business Activities a. Financing Activities- borrowing money and issuing shares of stock in exchange for cash a.i. Creditors (business borrows money) a.i.1. Liabilities- amounts owed to creditors (in the form of debt and other obligations) a.i.1.a. Note payable- paid to bank a.i.1.b. Bond payable- paid to investors a.ii. Common stock- total amount paid in by stockholders for the shares they bought a.ii.1. Dividends- payments made to stockholders on a regular basis b. Investing Activities- purchase of those resources a company needs in order to
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Notes Chapter 1 - Notes Chapter 1 I. Business Entities a....

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