Introduction to Financial Statements

Topic

Introduction to Financial Statements

Instructions

Please read Accounting: Tools for Business Decision Making, Ch. 1: Introduction to Financial Statements.

What are some key points?

Answer preview

Chapter 1 is largely concerned with overview of business formations and activities, activities involved in business, and matters related to the preparation and operations of financial statements in businesses. In the chapter, business forms are presented as only three, including the sole proprietorships, partnerships, and corporations. Unique characteristics of sole proprietorship is that it is easy to form, enjoys some tax advantages, and one owner controls the entire business. Partnerships are easy to establish, have access to more resources and larger pool of skills as compared to sole proprietorships, and are controlled by several business owners. Finally, stockholders own corporation. Corporations operate as separate legal entity meaning that stockholders have no liability to its acts or debts, are controlled by centralized management that is appointed by shareholders, and their ownership is transferable through buying or selling of shares.

Word count: 307