Accounting Notes

Capital - used to run and start a business; come from owners and lenders of the business

Enterprise - another name for a business organization

For-Profit Firm - goal to make a profit for its owners

Not-For-Profit Firm - goal to provide good and/or services to its clients; organization or agency

Revenue - amount earned for goods and services, and the expenses for selling those goods/services

Net Income - = (all revenue) - (all expenses), over a period of given time

4 Main Business Types: manufacturing, financial, service, merchandising

Merchandising (wholesale) - buys goods from a business, adds value, sells to business

Merchandising (retail) - buys goods, adds value, sells to final consumer (customer)

Sole Proprietorship - business with a single owner

Partnership - owned by 2 or more people

Corporation - special legal form of business where the business is a legal entity separate from the owners; can have a single or large number of owners

-ownerships split into shares of common stock

-owners of these shares is a stockholder/shareholder

-corp owner do not include company earnings in personal tax returns, unlike others

Stock Exchange - buy and sell shares of a publicly-traded corp

Stock Market - the collection of stock exchanges

Securities and Exchange Commission (SEC) - monitors the stock market and financial reporting of firms trading on the market

Advantages of a Corp:

- diversification, or owning shares of multiple companies

- limited liability, risk only their money invested and not their assets or personal property

Disadvantages of a Corp:

- separation of management and ownership

- taxed twice, net income is taxed + dividends given to shareholders are taxed

LLP - limited liability partnership; mainly businesses of law, medicine and accounting; not liable for the malpractice of another business partner; not available in all states and usually is limited to certain professions only

LLC - advantages of limited liability...