Accounting 200 Review for Exam 1
Chapter 1: 1. Forms of Business Organizations: a. Sole Proprietorship i. Business owned by a single person ii. Ex. If you want to start a business without outside investors b. Partnership iii. Business owned by two or more persons iv. Ex. If you want to start a business with a friend you can form a partnership c. Corporation v. Completely different from proprietorship or partnership vi. Entity that is legally separate from its owners and involves outside investors in the business through issuance of shares vii. External funding is raised when individuals purchase shares of ownership 1. Typically referred to as common stock 2. Each share of stock represents a unit of ownership 2. What information would a company’s investors and creditors be interested in knowing to make informed decisions? d. Investors and creditors want to know about the company’s resources and their claims to those resources 3. Basic Accounting Equation e. Assets = Liabilities + Stockholders’ Equity f. Assets viii. Resources owned by the company ix. Land, building, equipment, cash, inventory, etc. g. 2 parties of the company claim the resources x. Creditors xi. Investors h. Liabilities xii. Amounts owned to creditors xiii. Ex. Amounts owed to bank, suppliers, government, etc. xiv. Must be paid by a specific date i. Stockholders’ equity xv. Investors or owners claim any resources of company not owed to creditors 3. If dealing with a corporation then we refer to owners’ claims to resources as stockholders’ equity since stockholders are the owners of the corporation

4. Profitability j.