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acc100 review.docx

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Department
Accounting
Course
ACC 100
Professor
Else Grech
Semester
Winter

Description
ACC100 reviewChapter 1 AssetsLiabilitiesEquityExamples of AssetsCash Accounts ReceivableInventoriesPrepaid ExpensesEquipmentBuildings propertyLicenses franchise rights patentsInvestment in other businesses Examples of Liabilities Accounts PayableAccrued LiabilitiesSalariesWages PayableTaxes PayableLoan PayableMortgage Payable Examples of EquityShare Capital eg Common SharesRetained Earnings11 What are the three different forms of business organizations What are the advantages and the disadvantages to each of these formsTwo different forms only Business entities and Nonbusiness entitiesBusiness entities consist of sole proprietorship corporation and partnershipBusiness entities are organized to earn income 1 Sole Proprietorship a Advantages 1No organizational formalities 2Decision making is informal and centered in the owner 3No qualification requirements for doing business in other states 4Minimal reporting to governmental entities 5Business profits are subject to only one tax at the individual level and are not subject to double tax as would be the case if the profits were realized by a C corporation 6Losses are available on the owners personal income tax return and can offset other income subject to the passive loss rules b Disadvantages 1Owner has unlimited liability for obligations and liabilities of the business 2Death or disability of owner terminates business 3Sale or other transfer of business requires transfer of individual assets 4No opportunity to utilize equity capital contributed by persons other than the owner 5Business profits are taxed as income to the owner and as a result will be subject to selfemployment tax as well as income tax 2Partnership a Advantages 1Multiple owners can provide a combination of individual resources and talents 2Minimal formalities are required for organization 3Decision making may be informal 4No qualification requirements for doing business in other states 5Minimal reporting to governmental entities 6Business profits are subject to only one tax at the individual partner level and are not subject to double tax as would be the case if the profits were earned by a C corporation 7Losses are available on the partners personal income tax returns and can offset other income subject to the passive loss rules 8Special allocations may be made for income tax purposes 9Disproportionate distributions may be made to partners b Disadvantages 1Partners have unlimited liability for obligations and liabilities of the business 2Death disability or withdrawal of a partner may terminate partnership 3All partners have the right to participate in management 4All partners have broad authority to act on behalf of and incur debts and liabilities for the partnership 5Business profits are taxed as income to the individual partners and as a result may be subject to selfemployment tax as well as income tax 5 Corporation 2
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