Simple to establish
Shared control
Broader skills and resources
Tax advantages
Partnership
A separate legal entity
Easier to transfer ownership
Easier for company to raise funds
No personal liability
Incomes taxes are higher than other forms of business
Corporation
Are now allowed in all states
Combine the tax advantages of partnerships with the liability of corporations
(S corps)
Hybrid forms of organization
Managers, directors, and supervisors who plan, organize, and run a business
Purchasing resources a company needs in order to operate
Investing activities
What type of business activity?
Performing the day-to-day actions to produce and sell a product or provide a service
Operating activities
Types of investing activities: (2)
Borrowing
Issuing Stock
What type of business activity?
Performing a service for a customer
Operating
What type of business activity?
Issuing shares of stock in exchange for cash
Financing
What type of business activity?
Purchasing equipment used in operations
Investing
How to set up Statement of retained earnings:
Beginning of year RE
+ Net Income
- Dividends
End of year RE
What is the Transaction Identification Process?
Did the financial position (assets, liabilities, or stock holder's equity) of the company change?
Used to demonstrate the effect that each transaction has on particular financial statements
Retained Earnings:
Increases when the company recognizes revenue
Reduced when the company incurs expenses or pays dividends
Tabular analysis
Debit or Cred?
Common Stock
Retained Earnings
Dividends
CS: Credit
RE: Credit
Div.: Debit
Indicate to which business activity, operating, investing activity, or financing activity, each item relates:
1. Cash received from customers
2. Cash paid to stockholders (dividends)
3. Cash received from issuing new common stock
4. Cash paid to suppliers
5. Cash paid to purchase a new office building
6. Securing outside funds
7. Purchasing resources needed to operate
8. Revenues/ expenses (Income-generating activities/ costs of performing activities)
1. Operating activity
2. Financing activity
3. Financing activity
4. Operating activity
5. Investing activity
6. Financing activity
7. Investing activity
8. Operating activity
Which of the following questions would a creditor most likely ask?
D)
Porter Veterinary Services recently purchased several new stock trailers for their equine and bovine clients. The stock trailers increased their long-term assets by 50%. Porter Veterinary Services most likely used cash obtained from ________ activities to purchase these trailers.
financing
When a company’s revenues exceed their expenses, they record a net ____.