Solution Manual For
Financial Accounting Tools For Business Decision Making 10th Edition Paul D. K
CHAPTER 1
Introduction to Financial Statements
Learning Objectives
1. Identify the forms of business organization and the uses of accounting information.
2. Explain the three principal types of business activity.
3. Describe the four financial statements and how they are prepared.
*4. Explain the career opportunities in accounting.
ANSWERS TO QUESTIONS
1. The three basic forms of business organizations are (1) sole proprietorship, (2)
partnership, and
(3) corporation.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
2. Advantages of a corporation are limited liability (stockholders not being personally
liable for cor- porate debts), easy transferability of ownership, and ease of raising
funds. Disadvantages of a corporation are increased taxation and government
regulations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
3. Proprietorships and partnerships receive favorable tax treatment compared to
corporations and are easier to form than corporations. They are also owner
controlled. Disadvantages of proprietorships and partnerships are unlimited liability
(proprietors/partners are personally liable for all debts) and difficulty in obtaining
financing compared to corporations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
4. Yes. Companies can choose one of the hybrid business forms, limited liability
corporations (LLCs) or subchapter S corporations, which combine the tax advantages
of partnerships with the limited liability of corporations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment,
or pay taxes without receiving, using, or dispensing financial information. Accounting
provides financial information to interested users through the preparation and
distribution of financial statements.
Financial Accounting Tools For Business Decision Making 10th Edition Paul D. K
CHAPTER 1
Introduction to Financial Statements
Learning Objectives
1. Identify the forms of business organization and the uses of accounting information.
2. Explain the three principal types of business activity.
3. Describe the four financial statements and how they are prepared.
*4. Explain the career opportunities in accounting.
ANSWERS TO QUESTIONS
1. The three basic forms of business organizations are (1) sole proprietorship, (2)
partnership, and
(3) corporation.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
2. Advantages of a corporation are limited liability (stockholders not being personally
liable for cor- porate debts), easy transferability of ownership, and ease of raising
funds. Disadvantages of a corporation are increased taxation and government
regulations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
3. Proprietorships and partnerships receive favorable tax treatment compared to
corporations and are easier to form than corporations. They are also owner
controlled. Disadvantages of proprietorships and partnerships are unlimited liability
(proprietors/partners are personally liable for all debts) and difficulty in obtaining
financing compared to corporations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
4. Yes. Companies can choose one of the hybrid business forms, limited liability
corporations (LLCs) or subchapter S corporations, which combine the tax advantages
of partnerships with the limited liability of corporations.
LO 1 BT: K Difficulty: E TOT: 1 min. AACSB: Knowledge AICPA BC: Governance Perspective
5. Yes. A person cannot earn a living, spend money, buy on credit, make an investment,
or pay taxes without receiving, using, or dispensing financial information. Accounting
provides financial information to interested users through the preparation and
distribution of financial statements.
