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Chapter 1

MGMT 30A Chapter Notes - Chapter 1: Legal Personality, Accounts Payable, Sales Tax


Department
Management
Course Code
MGMT 30A
Professor
Patricia Wellmeyer
Chapter
1

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Chapter 1
Forms of Business Organization
Sole Proprietorship: owned by one person
o Simple to establish
o Owner controlled
o Tax advantages
Partnership: owned by two or more persons, not enough economic resources, partners
bring unique skills or resources
o Simple to establish
o Shared control
o Tax advantages
Corporation: separate legal entity owned by stockholders, pay higher taxes
o Easier to transfer ownership
o Easier to raise funds
o No personal liability
Hybrid forms of Business Organization
Limited Liability Companies (LLCs)
Subchapter S corporations
Accounting: information system that identifies, records, and communicated the economic
events of an organization to interested users
Internal users: managers who plan, organize, and run a business, marketing managers,
production supervisors, finance directors, and company officers
External users: investors, creditors, taxing authorities, customers, labor unions, regulatory
agencies
Sarbanes-Oxley Act (SOX): reduce unethical corporate behavior, decrease likelihood of future
corporate scandals, top management must certify accuracy of financial information, increased
independence of outside auditors that review accuracy of corporate financial statements and
oversight role of board of directors
Accounting information system
Creditors: persons or entities that the business owes money to
Liabilities: amounts owed to creditors in form of debt or other obligations
Note payable:
Bonds payable:
Common stock: total amount paid by stockholders for the shares they purchase, sells new
shares of stock
Generally Accepted Accounting Principles (GAAP): rules of accounting
Ceditos’ lais ust e paid efoe stokholdes’ lais
Dividends: payments of cash from a corporation to its stockholders
Assets: resources owned by a business
Fixed assets: property, plant, and equipment
Revenue: increase in assets or decrease in liabilities resulting from the sale of goods or
performance of services in the normal course of business, sales revenue, service revenue, and
interest revenue
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