Forms of Business Organization
One of six common considerations an start-up owner would have when establishing which entity type is right for their business.
What is (any are acceptable):
Liability of Ownership
Tax Implications
Cost and Ease of Establishment
Continuity of the Business
Management Control
Ease of Raising Capital
All cash goods, equipment, supplies, and property owned by a company; equipment and property leased to a company (known as right-of-use assets); and amounts owed to the company.
What is an asset?
Amounts owed by a company to businesses or individuals
What is a liability?
A financial statement that describes how successfully a business performed its asset conversion during a given period. It reports revenues, expenses, and the profit or loss that results from subtracting expenses from revenues.
What is an income statement?
The five parts to a complete financial statement.
What are:
Balance sheet
Income statement
Statement of cash flow
Statement of shareholders' equity
Notes to financial statements
The simplest entity type to establish; not a separate legal entity from its owner.
What is a Sole Proprietorship?
Assets with a useful life of more than one year
What are non-current assets?
The cash that owners invested in a business to start it, plus any additional money they have contributed to the business since then, plus retained earnings.
What is owners' equity?
This is what results from taking revenue less costs of goods sold.
What is Gross Profit?
This is a category of equity where net income flows from the income statement to the balance sheet.
What is retained earnings?
Type of corporation that is costly to establish; taxes are paid at corporate rate, which is generally higher than the individual rate
What is a C Corporation?
Raw Materials, Work in Process and Finished Goods
What are types of inventory?
Liabilities due within the next 12 months following the statement date
What is a current liability?
This is one of three methods to calculate and recognize cost of goods sold when the specific identification method can not be used.
What is (any of the following answers is correct):
Average cost method
FIFO
LIFO
These are the rules that guide managers and accountants in preparing and issuing financial statements for external users.
What are Generally Accepted Accounting Principles?
Type of corporation that is easy to establish, and each shareholder pays taxes on their share of the profits.
What is an S Corporation?
All fixed assets, except this type, depreciate over the useful life of the asset.
What is land?
This type of current liability is owed to creditors and vendors, involves a bill or invoice, and carries no interest rate.
What is Accounts Payable?
Expenses of the operating cycle that are not included in inventory; also known as selling, general and administrative expenses.
What are operating expenses?
The three parts of the Statement of Cash Flows
Operating Activities
Investing Activities
Financing Activities
Not a corporation, not a partnership- this entity type combines the liability advantages of a corporation with the tax advantages of a partnership.
What is a Limited Liability Company (LLC)?
One of two methods for accounting for Bad Debts
What is (either is correct):
Direct write-off method
Allowance Method
A payment to a corporation's stockholders, usually in the form of cash
What is a distribution?
Net sales minus all expenses
What is net profit?
One of four parts of the Operating Cycle
What are (any are correct):
Purchase goods or raw materials
Produce goods or services for sale
Sell goods or services
Collect cash from customers