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There are three types of
Ownership
ySole proprietorshipyPartnership
yCorporation
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A sole proprietorship
or single proprietorship, is a business owned by
one person. No legal requirements must be metin order to start this form of business, other than
to file for a business license and register abusiness name.
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y OneOwner
y Separate entity for accountingpurposes
y Not a separate legal entity fromthe owner
y Unlimited liability
y Limited life
y Owner taxed on profits
Sole Proprietorship
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A proprietorshipis owned by one
individual.
Advantages Ease in organizing
Low cost of
organizingDisadvantage
Limited source of
financial resources Unlimited liability
Joes
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A partnership
Is owned by two or more persons called partners.
Like a proprietorship, no special legalrequirements must be met in order to start a
partnership, other than to register the businessname and obtain a business license.
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y Two or more owners
y Separate entity foraccounting purposes
y
Not a separate legal entityfrom the owners
y Unlimited liability
y Limited life
y Owners taxed on profits
Partnerships
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A partnership isowned by two or
more individuals.
Advantages
More financialresources than a
proprietorship.
Additionalmanagement skills.
Disadvantage
Unlimited liability.
Joe and Martys
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A corporation
Is a business that is a separate legal entity
chartered (or incorporated) under provincialand federal laws. A corporation is responsible
for its own acts and its own debts.
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One or more owners
Separate entity foraccounting purposes
Separate legal entity fromthe owner(s)
Limited liability
Unlimited life
Corporation taxed onprofits
Corporations
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Not-for-profit andgovernmentorganizations
No identifiable owner
Examples: schools,charities, libraries,hospitals, police, shelters
Corporations
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A corporation is
organized under stateor federal statutes as a
separate legal entity.
Advantage The ability to obtain
large amounts of
resources by issuingstocks.
Disadvantage
Double taxation.
J & M, Inc.
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Non-Business Organizations
Is not for profit, no specific owner (usually a
board of directors)
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Internal
Owners, Managers
External
Bankers and other creditors,
investors and potentialinvestors, unions, externalauditors
Users of Accounting InfoUsers of Accounting Info
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A business stakeholderis a person or
entity having an interest in theeconomic performance of the business.
Business StakeholdersBusiness Stakeholders
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2
Assessstakeholders
informational
needs.
The Process of ProvidingThe Process of Providing
InformationInformationSTAKEHOLDERS
Internal:
Owners,
managers,employees
External:
Customers,
creditors,government1
Identify
stake-holders.
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Accounting
Information
System
Design the
accountinginformation
system to meet
stakeholders
needs.
34
Record
economic
data about
business
activities
and events.
The Process of ProvidingThe Process of Providing
InformationInformation
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5
Prepare
accounting
reports forstakeholders.
STAKEHOLDERSInternal:
Owners,
managers,employees
External:
Customers,
creditors,government
Accounting
Information
System
The Process ofThe Process of
Providing InformationProviding Information
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P
rofession ofAccountingP
rofession ofAccounting
Accountants employed by a business firm or
a not-for-profit organization are said to beengaged in private accounting.
Accountants and their staff who provide
services on a fee basis are said to be
employed in public accounting.
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TheAccounting EquationTheAccounting Equation
Assets = Liabilities + Owners Equity
The resourcesThe resources
owned by aowned by a
businessbusiness
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TheAccounting EquationTheAccounting Equation
Assets = Liabilities + Owners Equity
The rights of theThe rights of the
creditors, whichcreditors, which
represent debtsrepresent debtsof the businessof the business
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TheAccounting EquationTheAccounting Equation
Assets = Liabilities + Owners Equity
The rights of theThe rights of the
ownersowners
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What is a business
transaction?
A business transaction is an economic event orcondition that directly changes an entitys financial
condition or directly affects its results of operations.
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