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Sole proprietorship
- - Own by one person
- - Easy to set-up
- - Personal liable for business debt
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Partnership
- - Own by more than one person
- - Partner are all Liable
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Corporation
- - Owner are shareholders
- - Are not liable for business debt
- - Subject to many regulations
- - Separate legal entity
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Accounting
A system of analyzing, recording, and summarizing the results of a business activities and then reporting the results to decision makers
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Management Accounting
Working from the inside of the company
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Financial accounting
Working from the outside of the company
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Asset = Liability + Shareholder's Equity
Measurable values = Debts + Contributed capital/ Retained earning
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Net Income
Revenues - Expenses
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Financial Statements is prepare in what order?
- 1. Income Statement
- 2. Statement of Retained
- 3. Balance sheet
- 4. Statement of cash flows
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Corporation Advantage/Disadvantage
- Advantage - Owner cannot lose more than their investment
- Disadvantage - legal fee for creating a corporation, income taxes returns must be files for both the corporation and its owner
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Managerial Accounting reports
- Detailed financial plans and continually updated reports about the operating performance of the company
- - For internal users
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Primary external group
- Creditors: anyone to whom money is owed, banks, suppliers
- Investors - Shareholders
- Other - Customers
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Shareholders' Equity
Contributed capital + Retained Earnings
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Incurred
The activities giving rise to a cost
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Cost principle
Assets are initially reported on the balance sheet based on their original cost to the company
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Main interested of Creditor
- 1. Is the company making enough to paid their load - through cash flow
- 2. Does the the company have enough assets to cover their liability
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Canadian Generally Accepted Accounting (GAAP)
Produce financial information to present investors/lenders/creditors in making decisions as capital providers
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2 fundamental characteristic to find financial information useful are?
- Relevant
- Faithful representation: Comparable, Verifiable, Timely, Understandable
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