ACC 201 In-class Notes Practice

Forms of Business Organizations: Sole Proprietorship Sole Proprietorship: - simple to [blank_start]establish[blank_end] -[blank_start]owner[blank_end] controlled -tax [blank_start]advantages[blank_end] -no need to [blank_start]file[blank_end] formal documentation -treated as a flow [blank_start]through[blank_end] income, not taxed at business level -harder to get [blank_start]funding[blank_end] -harder to [blank_start]transfer[blank_end] ownership -[blank_start]unlimited[blank_end] liability -creditors can go after [blank_start]personal[blank_end] assets

Forms of business organizations: Partnership Partnership -simple to [blank_start]establish[blank_end] -shared [blank_start]control[blank_end] (at least 2) -broader [blank_start]skills[blank_end] and resources -tax [blank_start]advantages[blank_end] -no formal filings -flow through entity -difficult to get [blank_start]funding[blank_end] and transfer ownership General Partner(ship) - GP - [blank_start]unlimited[blank_end] liability Limited Partner(ship) - LP -at least one GP while others can be LP -goes after GP assets instead of LP -GP can be involved in [blank_start]management[blank_end], LP can't

Forms of business organizations: Corporation Corporation - easier to [blank_start]transfer[blank_end] ownership - easier to raise [blank_start]funds[blank_end] - no personal liability - [blank_start]limited[blank_end] liability - subject to [blank_start]government[blank_end] regulations and [blank_start]state[blank_end] law requirements - taxes on dividends and potential for [blank_start]double[blank_end] taxation

Hybrid business forms: combination of corporation and flow throughs S Corporation - meant for [blank_start]small[blank_end] businesses - [blank_start]limited[blank_end] liability - flow through entity Limited Liability Companies - has members - subject to certain state requirements - [blank_start]limited[blank_end] liabilities - flow through entity

Users and Uses of Financial Information Internal Users - [blank_start]within[blank_end] the organization itself - management - human resources - marketing -finance - these 4 need info from accounting to make [blank_start]decisions[blank_end] - uses financial statements External Users - users of financial statement [blank_start]outside[blank_end] of organization but might have a direct interest in the company - investors - creditors - regulatory agencies - tax authorities - consumers

Ethics in Financial Reporting: Enron, WorldCom, etc Sarbanes-Oxley Act (SOX) - management is required to certify [blank_start]accuracy[blank_end] of financial statements (more accountability) - stiffer [blank_start]fines[blank_end] and penalties - auditors are required to have increased [blank_start]independence[blank_end] - greater [blank_start]oversight[blank_end], board directors have more accountability Solving an ethical dilemma 1. [blank_start]recognize[blank_end] an ethical situation and the ethical issues involved 2. identify and [blank_start]analyze[blank_end] the principal elements in the situation 3. Identify [blank_start]alternatives[blank_end] an weigh the impact of each on various stakeholders