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The first 3 Chapter Notes for the first midterm

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Ryerson University
ACC 100
Walter Krystia

Midterm Notes Chapter 1 Accounting Communication Accounting organizes and summarizes information about economics activities Financial accounting provides info to external users to help make certain business Management accounting provides info to internal users to help plan and control operations Organization is a collection of individuals pursuing the same goal or objective. All organizations, whatever their size, require finances and must make financial decisions. Thus organizations need financial information in order to describe the resources they hold and to support the various financial decisions they make. Business Entities Business entities are organized to earn an income (commonly termed a profit). Legally a profit-oriented company is one of three types: 1. Sole Proprietorships: This form of organization is characterized by a single owner. Many small businesses are organized as sole proprietorships. Very often the business is owned and operated by the same person. Despite the close relationship between the owner and the business, the affairs of the two must be kept separate. Economic entity concept is the assumption that a single, identifiable unit must be accounted for in all situations. 2. Partnerships: A business owned by two or more individuals and many small businesses begin as partnerships. When two or more partners start out, they need an agreement as to how much each will contribute to the business and how they will divide the income. In large businesses, the partnership agreement is formalized in a written document. Like a sole proprietorships, a partnership is not a taxable entity. 3. Corporations: A form of entity organized under the laws of a particular province or the federal government; ownership evidenced by shares. Share is a certificate that acts as ownership in a corporation. Bond is a certificate that represents a corporations promise to repay a certain amount of money and interest in the future.
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