Introduction to Business and Accounting

Introduction to Business and Accounting - Introduction to...

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Introduction to Business and Accounting Private Enterprise o Where individuals (rather than public institutions, for example the gov) own companies (businesses) that produce and sell goods/services for a profit Profit=primary objective of a company o In order for company to succeed in this system it must be able to obtain cash to begin to operate and then to grow o Fall into three categories: service, merchandising, and manufacturing companies o Service Companies Perform services or activities that benefit individuals or business customers Ex. Great Cuts, Merry Maids, UPS; also, professional practices such as accounting, law, architecture, and medicine o Merchandising Companies Purchases goods (aka merchandise/products) for resale to their customers Some are wholesalers Those who primarily sell their goods to retailers or other commercial users Ex. Plumbers, electricians Others are retailers Directly sell their goods to the final customer/ consumer Ex. JCPenny, Best Buy, Amazon, shoe stores, grocery stores o Manufacturing Companies Make their products and then sell them to their customers Entrepreneurship o An individual who is willing to risk this uncertainty of not knowing for sure that customers will buy the company provides in exchange for the reward of earning a profit is called a entrepreneur o Combination of three factors Company owner’s idea The willingness of the company’s owner to take a risk Abilities of the company’s owner and employees to use capital to produce and sell goods/services Sources of capital for a company o The entrepreneur’s investment in the company Invests money “up front” to get company started, hoping to eventually get money contributed back [return of the contribution] and to periodically receive additional money above amount contributed [ a return on the contribution] Uses money to acquire resources needed to function o Borrowing Occurs when the company isn’t large enough to finance its growth so it borrows money from institutions like banks [called creditors]
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Remaining solvent means that the company can pay off its debts Another objective of a company Can be risky for the owner(s) because if company in unable to pay back debt then owner must personally assume responsibility Can be risky for company if it can’t repay its debts Unable to borrow more and then will find itself unable to continue operating Not-For-Profit Organizations o Use accounting info in their decision-making functions but don’t have profit- making as a goal o Includes educational and religious institutions; charitable organizations; municipalities, govs and some hospitals General Types of Business Organizations [Companies] o Sole Proprietorship Company owned by ONE individual whose the sole investor of capital into company Most of time, also acts as manager
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This note was uploaded on 02/06/2012 for the course ACCTCY 2036 taught by Professor Cunningham during the Spring '11 term at Missouri (Mizzou).

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Introduction to Business and Accounting - Introduction to...

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