Chapter 2 Flashcards
profit
the amount of money earned over and above the amount spent to keep the business operating
loss
businesses that spend more money they earn
entrepreneurs
people who transform ideas for products or services into real-world businesses
capital
money supplied by investors, banks, or owners of a business
service business
provides a needed service for a fee
merchandising business
buys finished products and resells them to individuals or other businesses
manufacturing business
buys raw materials, such as wood or iron ore, and transforms them into finished products through the use of labor and capital
sole proprietorship. give the advantages and disadvantages
business owned by one person
advantages
- owner has total control
- all profits go to owner
- easy to set up
disadvantages
- limited expertise
- hard to raise money
- owner has all risks
partnership. give the advantages and disadvantages
a business owned by two or more persons, who agree to operate a business as co-owners
advantages
- easy to start
- skills and talents are pooled
- more money is available
disadvantages
- conflicts between owners
- profits must be shared
- owners share all risks
corporation. give the advantages and disadvantages
a business organized that is recognized by law to have a life of its own. owned by stockholders
advantages
- easy to raise money
- easy to expand
- easy to transfer ownership
disadvantages
- costs more to start up
- complex to organize
- higher taxes
charter
a legal permission that gives a corporation certain rights and privileges
accounting system
designed to collect, document, and report on financial transactions affecting the business
manual accounting system
info processed by hand
computerized accounting system
info recorded by putting into computer
GAAP
Generally Accepting Accounting Principles, to prepare their reports
