L1

Question 1

business organization owned by one person., day-to-day operations, easy to organize, limited source of capital, proprietor’s unlimited liability,

Answer 1

Sole/Single proprietorship

Question 2

a contract where two or more persons bind themselves to contribute money, property, or industry to a common fund, to divide the profits among themselves.

Answer 2

Partnership

Question 3

artificial being independent of its owners., Owners are called stockholders (also called shareholders). Generally, stockholders have the right to vote, dividends, and new stock issues.

Answer 3

Corporation

Question 4

the account that bears the name of the owner. It represents the original and additional investment increased by n net income. It is also decreased by cash or asset withdrawal and net loss.

Answer 4

Capital

Question 5

is the owner’s initial investment when the business started from scratch.

Answer 5

Original investment

Question 6

is the investment that is gradually added through to the business by the owner during the course of operation.

Answer 6

Additional investment

Question 7

is the withdrawals made by the owner. It can either be cash or other assets.

Answer 7

Drawings

Question 8

1. Draft the heading.
2. Determine the beginning balance of capital (equity)
3. Determine the amount of investment (initial or additional)
4. Determine the amount of the net income
5. Determine the balance of the drawing (withdrawal) account
6. Determine the ending balance of the capital or owner’s equity account.

Answer 8

Steps in Preparation of Statement of Changes in Equity