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What is the accounting equation?
Assets = Liabilities - Owners Equity
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Assets=
(Give examples)
- What is owned
- (Building, cash, furniture, customer owes bills, inventory, supplies, etc)
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Liabilities=
(Give examples)
- What is owed
- (Employees wages, mortgage payable, business owes money to vendor, notes payable, taxes payable)
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Owners Equity=
(Give examples)
Capital, profits, losses
(Investments, capital stock, revenue, net income/ loss, owners capital, drawing/ dividends, earnings/ profits)
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What are Sole Proprietorships & Partnerships
Single or multiple owners of a business.
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What is a corporation?
Bigger companies that have stockholders (public and private)
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What are the advantages and disadvantages of a sole proprietorships or partnership?
Adv: Ease of info, income tax only at individual level, more owner involvement.
Disadv: Unlimited liability, limited ability to raise capital, mutal agency
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What are the advantages and disadvantages of having a corporation?
Adv: Limited liability, unlimited life, ability to raise capital
Disadv: Regulatory requirements (extensive paperwork, provide financial statements), double taxation
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