Week 1: Intro & forms of business organizations

Question 1

uses of accounting

Answer 1

identifies and records the economic events of an org and communicates the results to interested users

Question 2

users of accouonting

Answer 2

-internal users - mostly use management accounting
-external users - only have access to financial accounting

Question 3

sole proprietorship

Answer 3

-owned by one person
-simple to set up
-owner has complete control over the business
-business has a limited life
-owner has unlimited liability
-all income tax is paid by the owner
-equity areas is called “owners capital”

Question 4

partnership

Answer 4

-similar to a proprietorship, except owned by more than one person (the partners)
-formalized in a written agreement
-the business has a limited life
-each partner has unlimited liability
-income tax is paid by the partners
-equity area is called “partners capital” and a record for each partner

Question 5

corporation

Answer 5

-separate legal entity, owned by its shareholders
-has most of the rights and privileges of a person
-classified by purpose and ownership
–purpose: can be profit or not-for-profit
–ownership: public (if shares sold to public) or private
-shareholders enjoy limited liability
-can raise capital from wider range of investors
-has indefinite life and easy to transfer ownership
-corporation governance (board or directors)
-govt regulations (incorporated federally or provincially; stock market exchange rules)
-the corp pages income tax on its earnings (profit)
-the only form that can have “incorporated” “inc” “limited” “ltd” included in the name of the business