ACCOUNTING 201 EXAM 1
1. Sole Proprietorship
ANSWER business owned by one person simple to
establish
owner controlled
tax advantages
owner personally liable
financially difficult
2. Partnership
ANSWER 2 or more owners
simple to establish
1/
19
,shared control
broader skills and resources
tax advantages
personally liable
3. Corporation
ANSWER separate legal entity owned by stockholders easy
to transfer ownership
greater capital raising potential
unfavorable tax treatment
lower legal liabilities for owners
4. Internal Users of Financial Info
ANSWER Managers
-Finance borrow $ or issue stock?
2/
19
, -Marketing advertising costs
-HR hire or lay off ppl?
-Management expand busi? sell off parts?
5. External Users of Financial Info
ANSWER -Investors who should I invest in?
-Creditors should I loan them $?
-Others regulatory agencies, tax authorities, customers, labor
6. Types of Business Activities - Financing
ANSWER get large sums of $ from 2 sources
1. Creditors- borrowing creates liabilities(things the company owes)
2. Owners- selling/issuing stock to shareholders(shareholders equity-how much of
a company a stockholder owns)
3/
19
1. Sole Proprietorship
ANSWER business owned by one person simple to
establish
owner controlled
tax advantages
owner personally liable
financially difficult
2. Partnership
ANSWER 2 or more owners
simple to establish
1/
19
,shared control
broader skills and resources
tax advantages
personally liable
3. Corporation
ANSWER separate legal entity owned by stockholders easy
to transfer ownership
greater capital raising potential
unfavorable tax treatment
lower legal liabilities for owners
4. Internal Users of Financial Info
ANSWER Managers
-Finance borrow $ or issue stock?
2/
19
, -Marketing advertising costs
-HR hire or lay off ppl?
-Management expand busi? sell off parts?
5. External Users of Financial Info
ANSWER -Investors who should I invest in?
-Creditors should I loan them $?
-Others regulatory agencies, tax authorities, customers, labor
6. Types of Business Activities - Financing
ANSWER get large sums of $ from 2 sources
1. Creditors- borrowing creates liabilities(things the company owes)
2. Owners- selling/issuing stock to shareholders(shareholders equity-how much of
a company a stockholder owns)
3/
19
