Lesson 1: Forms of Business Organization
There are four forms of a business organization namely: sole proprietorship, partnership,
corporation, and cooperative.
FORM OF BUSINESS ORGANIZATION
Sole Proprietorship
o It is a form of business organization with only one owner.
o It has no separate legal existence.
o It can take fictitious/trade names
o It is the easiest to establish.
Partnership
o It is a contract whereby two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits
among themselves.
o It may also be formed for the exercise of a profession.
Corporation
o It is an artificial being created by the operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law or
incident to its existence.
Cooperative
o It is a duly registered association of persons, with a common bond of interest, who
have voluntarily joined together to achieve a lawful common social or economic
end, making equitable contributions to the capital required and accepting a fair
share of the risks and benefits of the undertaking in accordance with universally
accepted cooperative principles.
Lesson 2: Preparing Statement of Changes in Owner’s Equity
▪ Equity is equal to the net assets of the business. It reflects the portion of the sole proprietorships.
▪ Owner’s Capital is the only equity account on the balance sheet of sole proprietorships.
▪ The Owner’s Drawings account is used to accumulate the owner’s withdrawals during the year.
However, this account is not separately presented on the balance sheet. At the end of the year, the
drawing accounts are netted off against the Owner’s Capital account.
There are four forms of a business organization namely: sole proprietorship, partnership,
corporation, and cooperative.
FORM OF BUSINESS ORGANIZATION
Sole Proprietorship
o It is a form of business organization with only one owner.
o It has no separate legal existence.
o It can take fictitious/trade names
o It is the easiest to establish.
Partnership
o It is a contract whereby two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits
among themselves.
o It may also be formed for the exercise of a profession.
Corporation
o It is an artificial being created by the operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law or
incident to its existence.
Cooperative
o It is a duly registered association of persons, with a common bond of interest, who
have voluntarily joined together to achieve a lawful common social or economic
end, making equitable contributions to the capital required and accepting a fair
share of the risks and benefits of the undertaking in accordance with universally
accepted cooperative principles.
Lesson 2: Preparing Statement of Changes in Owner’s Equity
▪ Equity is equal to the net assets of the business. It reflects the portion of the sole proprietorships.
▪ Owner’s Capital is the only equity account on the balance sheet of sole proprietorships.
▪ The Owner’s Drawings account is used to accumulate the owner’s withdrawals during the year.
However, this account is not separately presented on the balance sheet. At the end of the year, the
drawing accounts are netted off against the Owner’s Capital account.
