This document discusses different types of businesses including sole proprietorships, partnerships, and corporations. It outlines the key advantages and disadvantages of each type. For example, sole proprietors have unlimited liability but full control, while corporations provide limited liability for owners but are more expensive to set up and regulated. The document also summarizes accounting concepts, principles, and frameworks that guide financial reporting for different types of businesses.
This document discusses different types of businesses including sole proprietorships, partnerships, and corporations. It outlines the key advantages and disadvantages of each type. For example, sole proprietors have unlimited liability but full control, while corporations provide limited liability for owners but are more expensive to set up and regulated. The document also summarizes accounting concepts, principles, and frameworks that guide financial reporting for different types of businesses.
This document discusses different types of businesses including sole proprietorships, partnerships, and corporations. It outlines the key advantages and disadvantages of each type. For example, sole proprietors have unlimited liability but full control, while corporations provide limited liability for owners but are more expensive to set up and regulated. The document also summarizes accounting concepts, principles, and frameworks that guide financial reporting for different types of businesses.
This document discusses different types of businesses including sole proprietorships, partnerships, and corporations. It outlines the key advantages and disadvantages of each type. For example, sole proprietors have unlimited liability but full control, while corporations provide limited liability for owners but are more expensive to set up and regulated. The document also summarizes accounting concepts, principles, and frameworks that guide financial reporting for different types of businesses.
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Types of Businesses and How
Accounting Concepts and -Long life of firm
Principles Affect Them -Has better access to financing Conceptual Framework of Basic Accounting Forms of Forms of Businesses Businesses Sole Proprietorship (Disadvantages) Partnership Corporation Sole proprietorship -Owner has unlimited liability Forms of Businesses -Total wealth can be taken to satisfy debts (Advantages) -Limited fund Sole proprietor -Owner receive all profits(and sustains all -Raising power tends to inhibit growth losses) -Limited to the management skills of the -Low organizational costs proprietor
-Income included and taxed on the -Difficult to give employees long-run career proprietor’s personal tax return opportunities
-Independence -Limited life of the business
-Ease of dissolution Partnership
-Owners have unlimited liability and may Partnership have to cover debts if the other partners -Can raise more funds than a sole proprietorship -Limited life of the business
-Borrowing power enhanced by more -Difficult to liquidate or transfer
owners partnership
-More managerial skill Corporation
-Taxes generally higher because corporate -Income included and taxed on partner’s income is taxed personal tax returns -More expensive to organize than other Corporation forms of business -Owners have limited liability which guarantees that they cannot lose more than -Subject to greater government regulation what they invested. -Lacks secrecy because stockholders are -Can achieve large size via sale of given reports ownership(stock)
-Ownership is readily transferable
Types of Business Operation accepted practices, which include some concepts that are not formally part of the -Service agree-upon conceptual framework and -Merchandising or Trading which may conflict with it at times -Manufacturing • Consistency • Full disclosure Generally Accepted Accounting • Conservatism or Prudence Principles (GAAP) Other Concepts Involving Financial -encompass the conventions, rules and Information procedures, necessary to define what accepted accounting practice is Substance over form Cost-benefit analysis Purpose of Accounting Standards Conceptual Framework and Underlying The overall purpose of accounting Assumptions standards is to identify proper accounting practices for the preparation and • Conceptual Framework presentation of financial statements. - summary of terms and concept that underlie the preparation and presentation Fundamental of financial statements from external users Qualitative Characteristics Assumptions - pertain to the content or substance of the - Basic notions or fundamental premises on financial information which the accounting process is based. Relevance Accounting entity concept Predictive value Going Concern Confirmative value Time-period Materiality Accrual Monetary Unit Faithful Representation Completeness Accounting Principles Neutrality Free from Error Cost principle Enhancing Qualitative Characteristics Matching principle Revenue Recognition principle - pertain to the form or presentation of the financial information • Comparability • Verifiability • Timeliness • Understandability
Accounting Conventions
- For accounting information to be
understandable, accountants must prepare financial statements in accordance with
"The Language of Business: How Accounting Tells Your Story" "A Comprehensive Guide to Understanding, Interpreting, and Leveraging Financial Statements for Personal and Professional Success"
