Sole Proprietorship -a business owned by one person
-simple to set up and gives you control over the business
Partnership a business owned by two or more persons associated as partners
Corporation a business organized as a separate legal entity owned by stockholders
Accounting the information system that identifies, records, and communicates the economic
events of an organization to interested users
Internal Users of Accounting Information managers who plan, organize, and run a business (ex. Marketing managers,
production supervisors, finance directors, and company officers)
,External Users of Accounting Information -Investors
-Creditors (such as suppliers and bankers use accounting information to evaluate
the risks of selling on credit or lending money)
-Taxing authorities (ex. IRS)
-Customers
-Labor unions
-Regulatory agencies (ex. Securities and Exchange Commission; Federal Trade
Commission)
Sarbanes-Oxley Act (SOX) -Passed by congress to reduce unethical corporate behavior and decrease the
likelihood of future corporate scandals
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent financial activity are much more severe
-Increased both the independence of the outside auditors who review the accuracy
of corporate financial statements and the oversight role of boards of directors
The two primary sources of outside funds for corporations ...borrowing money (debt financing) and issuing (selling) shares of stock in
are... exchange for cash (equity financing)
Liabilities -Amounts owed to creditors in the form of debt and other obligations
-Notes payable
-Bonds payable (debt securities sold to investors that must be repaid at a particular
date some years in the future)
Common Stock the term used to describe the total amount paid in by stockholders for the shares
they purchase
, Dividends cash payments to stockholders
Assets resources owned by a business
Revenue -the increase in assets or decrease in liabilities resulting from the sale of goods or
the performance of services in the normal course of business
-ex. sales revenue, service revenue, interest revenue
Inventory goods available for future sales to customers
Accounts Receivable the right to receive money in the future
Expenses -the cost of assets consumed or services used in the process of generating
revenues
-ex. marketing expenses, administrative expenses, interest expense, income taxes
-simple to set up and gives you control over the business
Partnership a business owned by two or more persons associated as partners
Corporation a business organized as a separate legal entity owned by stockholders
Accounting the information system that identifies, records, and communicates the economic
events of an organization to interested users
Internal Users of Accounting Information managers who plan, organize, and run a business (ex. Marketing managers,
production supervisors, finance directors, and company officers)
,External Users of Accounting Information -Investors
-Creditors (such as suppliers and bankers use accounting information to evaluate
the risks of selling on credit or lending money)
-Taxing authorities (ex. IRS)
-Customers
-Labor unions
-Regulatory agencies (ex. Securities and Exchange Commission; Federal Trade
Commission)
Sarbanes-Oxley Act (SOX) -Passed by congress to reduce unethical corporate behavior and decrease the
likelihood of future corporate scandals
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent financial activity are much more severe
-Increased both the independence of the outside auditors who review the accuracy
of corporate financial statements and the oversight role of boards of directors
The two primary sources of outside funds for corporations ...borrowing money (debt financing) and issuing (selling) shares of stock in
are... exchange for cash (equity financing)
Liabilities -Amounts owed to creditors in the form of debt and other obligations
-Notes payable
-Bonds payable (debt securities sold to investors that must be repaid at a particular
date some years in the future)
Common Stock the term used to describe the total amount paid in by stockholders for the shares
they purchase
, Dividends cash payments to stockholders
Assets resources owned by a business
Revenue -the increase in assets or decrease in liabilities resulting from the sale of goods or
the performance of services in the normal course of business
-ex. sales revenue, service revenue, interest revenue
Inventory goods available for future sales to customers
Accounts Receivable the right to receive money in the future
Expenses -the cost of assets consumed or services used in the process of generating
revenues
-ex. marketing expenses, administrative expenses, interest expense, income taxes
