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ACC 100 (209)
Chapter 1

ACC100 Chapter 1.docx

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Ryerson University
ACC 100
Cheryl Dyson

Chapter One: Accounting Communication and Introduction Forms of Organizations  Organization – collection of individuals pursing the same goal/objective  Business Entities – generally organized to earn income (profit) o Sole Proprietorship – business with a single owner (operator)  Affairs of business and individual must be kept separate  Economic Entity Concept – single identifiable unit of an organization must be accounted for in all situations (separate personal costs from business costs  separate financial statements)  CRA doesn’t recognize separate existence of prop. From owner (not taxable, income earned is taxed on owners tax return) o Partnership – owned by two or more individuals, and with the characteristic of unlimited liability  Have an agreement on how much each will contribute and how to divide income  Not taxable, individual partners pay taxes on their shares on income of the business o Corporations – entity organized under laws of a particular province/federal government, with ownership evidenced by shares  First, one must file articles of incorporation with gov., if approves, corporate charter is issued and can begin issuing shares  Shares – certificate that acts as evidence of ownership in a corporation  Can also be traded on organized stock exchanges (TSX)  Easier to raise large amount of money in short time period by selling shares or bond  Bonds – certificate that represents corporation’s promise to repay a certain amount of money at a future date (with interest paid semiannually)  Ease of transfer for ownership  Limited liability of shareholder (liable only for the amount contributed to the business)  Proprietors/general partners can be held personally reliable for debt of business  Non-business – organization operated for some purpose other than to earn profit o Lack of identifiable owner o Fund accounting – lack of identifiable owner and profit motive changes (accounting used by non-busi entities) o Demand for information provided by an accounting system (ex. Hospital presenting financial statements to present to prospective contributors)  Organizations and Social Responsibility – organizations sensitive to broader social responsibilities The Nature of Business Activity Corporation’s activities:  Cash Flow statement - shows operation, financing, and investing activities of business (receipts and payements)  Financial Activities – money is needed to start a business o Liability – obligation of a business (borrows money from bank; note payable, sells bonds; bonds payable, taxes owed to government; tax payable, company owes another company money; accounts payable. o Capital Stock – dollar amount of shares sold to public  Shareholder is not lending money, but providing a permanent form of financing to the business  No due date to be repaid, if they want their original investment back, they sell their share  Creditor – someone to whom company has a debt  Expects repayment of amount loaned plus interest  Investing Activities – If operating activities are insufficient to permit desired investing, funds must be obtained from creditors/shareholders o Asset – future economi
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