Textbook Notes (363,472)
Canada (158,372)
Accounting (74)
ACTG 1P91 (12)
Chapter 1

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Brock University
Sohyung Kim

Accounting 1P93 Ch.1 Introduction 1. Types of entity 1.1 Not-For-Profit Entity - Municipal Government (Provide services) - Hospitals (Provide healthcare) - Schools (Provide education) 1.2 For-Profit Entity (Business Entity) - Sole Proprietorship  One owner (ex. Paul’s Lawn Care) - Partnership  Two or more owners (ex. Most accounting firms) - Corporation  In general, lots of owners 2. For Profit Entity; A Closer Look 2.1 Sole Proprietorship and Partnership - Owners = Managers - Unlimited liability - Pass through entity (do not pay separate income tax) 2.2 Corporation - Owners ≠ Managers - Limited liability (all you can lose is limited to your investment) - Corporation is called an “Artificial Person” - To form a corporation, articles of incorporation (equivalent to birth certificate) should be filed with Provincial Government - Subject to income tax.  Double taxation, owners and corporation pay income tax 3. Accounting is the Language of Business 4. Financial Accounting - Communication from managers to outside owners - Reports are public information - Reports are periodic, quarterly or annually - There are certain rules and formats to follow when preparing reports (financial statements) - These rules are called Generally Accepted Accounting Principles (GAAPs) - GAAPs are always changing because business environments are constantly changing (Ex. Online Shopping) Canadian GAAP: - IFRS for public companies - IFRS or ASPE for private companies ** IFRS = International Financial Reporting Standards ** ASPE = Accounting Standards for Private Enterprise 5. Financial Statements [F/S] Financial Statements have 5 components - Balance Sheets (stock) - Income Statement (flow) - Statement of Retained Earnings (flow) - Statement of Cash Flows (flow) - Notes to Financial Statements 6. Stock vs. Flow - “Stock" is measured at a point in time - “Flow” if measured over a period of time Ex. Future Shop has 200 iPhones in stock right now (stock) Future Shop so
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