Accounting Chapter 1- Balance Sheet

Accounting Chapter 1- Balance Sheet - Accounting Chapter 1...

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Accounting Chapter 1- Nature of Business and Accounting The objective of most businesses is to earn a profit. Profit is the difference between the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services. Forms of Business A business is normally organized in one of the following four forms: ● proprietorship ● partnership ● corporation ● limited liability company A proprietorship is owned by one individual. A partnership is owned by two or more individuals. A corporation is organized under state or federal statutes as a separate legal entity. The ownership of a corporation is divided into shares of stock. A corporation issues the stock to individuals or other companies, who then become owners or stockholders of the corporation. A primary advantage of the corporate form is the ability to obtain large amounts of resources by issuing shares of stock. In addition, the stockholders’ liability to creditors for the debts of the company is limited to their investment in the corporation. A limited liability company (LLC) combines attributes of a partnership and a corporation. The primary advantage of the limited liability company form is that it operates similar to a partnership, but its owners’ (or members’) liability for the debts of the company is limited to their investment. ● A low-cost strategy is one where a company designs and produces products or services at a lower cost than its competitors. Such companies often sell no- frills, standardized products and services. ● A premium-price strategy is one where a company tries to design and produce products or services that serve unique market needs, allowing it to charge premium prices. Such companies often design and market their products so that customers perceive their products or services as having a unique quality, reliability, or image. Business Stakeholders
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Accounting Chapter 1- Balance Sheet - Accounting Chapter 1...

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