ACC 201 In-class Notes Practice

Forms of Business Organizations: Sole Proprietorship

Sole Proprietorship:
- simple to
- controlled
-tax
-no need to formal documentation
-treated as a flow income, not taxed at business level
-harder to get
-harder to ownership
- liability
-creditors can go after assets

Forms of business organizations: Partnership

Partnership
-simple to
-shared (at least 2)
-broader and resources
-tax
-no formal filings
-flow through entity
-difficult to get and transfer ownership

General Partner(ship) - GP - 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 , LP can't

Forms of business organizations: Corporation

Corporation
- easier to ownership
- easier to raise
- no personal liability
- liability
- subject to regulations and law requirements
- taxes on dividends and potential for taxation

Hybrid business forms: combination of corporation and flow throughs

S Corporation
- meant for businesses
- liability
- flow through entity

Limited Liability Companies
- has members
- subject to certain state requirements
- liabilities
- flow through entity

Users and Uses of Financial Information

Internal Users - the organization itself
- management
- human resources
- marketing
-finance
- these 4 need info from accounting to make
- uses financial statements

External Users - users of financial statement 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 of financial statements (more accountability)
- stiffer and penalties
- auditors are required to have increased
- greater , board directors have more accountability

Solving an ethical dilemma
1. an ethical situation and the ethical issues involved
2. identify and the principal elements in the situation
3. Identify an weigh the impact of each on various stakeholders