Business Types
What business structure is owned by one person?
Sole proprietorship
Because it’s basically just one person owning the whole business
What financial statement shows assets, liabilities, and owners’ equity?
Balance sheet
It gives you a snapshot of what the business owns, what it owes, and the owners’ share at a certain point in time.
What does GAAP stand for?
Generally Accepted Accounting Principles
It’s basically the standard accounting rules used to keep financial reporting consistent.
What business structure is owned by two or more people?
Partnership
The business is being owned together by multiple people instead of just one person.
Finish the equation: Assets = Liabilities + _____.
Owners’ Equity
What is depreciation?
The decrease in value of a fixed asset over time
Things like equipment get older and worn down, so depreciation shows that loss of value over time.
What business structure helps separate the owners’ personal assets from the business?
Corporation
A corporation is treated as its own legal entity, so the owners usually have more protection for their personal assets.
What are things a business owns called?
Assets
Assets are anything valuable the business owns or controls, like cash, equipment, or inventory.
Is cash a current asset or a fixed asset?
Current asset
Cash is already available to use, so it’s definitely considered a current asset.
What does LLC stand for?
Limited Liability Company
It’s a business structure that gives the owners limited liability, meaning their personal assets have more protection.
What are debts that a business owes called?
Liabilities
Liabilities are basically money or obligations the business still has to pay.
Are buildings and equipment usually current assets or fixed assets?
Fixed assets
They’re expected to be used for longer than one year instead of being quickly turned into cash.
What type of liability means an owner may have to use personal money to pay business debts?
Unlimited liability
Basically, if the business can’t cover what it owes, the owner could personally be responsible for paying it.
What does liquidity mean?
How quickly an asset can be turned into cash
The easier something is to convert into cash, the more liquid it is.
What are sales made to customers on credit called?
Receivables
The customer hasn’t paid yet, but the business is expecting to receive that money.