Purpose of Financial Statements.docx

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Department
Business Administration
Course
Business Administration 2257
Professor
Prof
Semester
Spring

Description
INTRODUCTION TO THE ACCOUNTING CYCLECHAPTER 12 PRINCIPALS OF ACCOUNTINGUSERS AND USES OF FINANCIAL STATEMENTSInternal users People who work for the company who use the info to plan organize and run the companyExternal users People who work outside the company who use the info to lend invest regulate purchaseFORMS OF BUSINESS ORGANIZATIONA proprietorship is a business owned by one personoRepresentation in Financial Statement Owners Equity or CapitaloHow they get salary decrease cash increase drawings contracapital accountoHow to invest in company increase cash and increase capitaloCharacteristics Limited life if no agreement is not made to pass on ownershipUnlimited liability if they get suedgo bankrupt court can take personal assetsEase of formation few regulations to formTaxation Earnings are taxable income of owner whether you draw or notMutual agency owner has complete control A partnership is a business owned by more than one personoSame as a proprietorship except there is greater economic or talent resources A corporation is a legal entity owned by shareholdersoRepresentation in Financial Statement Shareholders Equity oHow owners get salary Individual Decrease cash increase salary expenseAll Shareholders Decrease retained earnings decrease cash Note For simplicity in this course dividends payable does not increase it is debited directly from the retained earnings
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