Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Describe the similarities and differences among the four different types of business entities discussed in the chapter.

Short Answer

Expert verified

Sole proprietorhip has only one owner, there are two or more owners in partnerships, and in the case of corporation and LLC—there is one or more owners.

Coprpoerartion and LLC has indefinite life, sole propreietorship terminates at owners’ willor death. Also, in case of partnership, it can be terminated at choice of partner or death.

Step by step solution

01

Types of Business Organizations

The different types of business organizations are Sole proprietorship, Partnership, Corporation and Limited-Liability Company (LLC).

02

Similarities and Difference

The similarities and difference between the different type of organizations are as follows:

Basis

Sole Proprietorship

Partnership

Corporation

LLC

Definition

In this businesss there is single owner.

In this business there are two or more owners, and are not considered as corporation.

It is recognized under the sate law, and treated as separate legal entity.

In this business, member is only liable for own actions.

Number of Owners

Single owner.

Two or more partners.

One or more stockholders.

One or more partners.

Life of Business

Terminates by owner’s choice or at death.

Terminates by partner’s choice or at death.

Indefinite.

Indefinite.

Personal liability of owners

Personal liability of owner.

Personal liability of partners.

No personal liability of stockholders.

No personal liability of partners.

Taxation

Not separate taxable entities.

It is not taxed. Partners pays tax on their income.

Separate taxable entity.

It is not taxed. Partners pays tax on their income..

Type of business

Small businesses.

Professional organization of accountants, attorneys, etc.

Small to large multinational businesses.

Partnership alternative.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

Identifying users of accounting information For each user of accounting information, identify if the user would use financial accounting or managerial accounting. a. investor e. controller b. banker f. stockholder c. IRS g. human resources director d. manager of the business h. creditor

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the “Big Four” accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid \)1,200 for the first month’s rent. 3 Purchased canoes for \(4,800 on account. 4 Purchased office supplies on account, \)750. 7 Earned \(1,400 cash for rental of canoes. 13 Paid \)1,500 cash for wages. 15 Paid \(50 dividends to stockholders. 16 Received a bill for \)150 for utilities. (Use separate payable account.) 20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, \)3,000. 26 Paid \(1,000 on account related to the November 3, 2018, purchase. 28 Received \)750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 4. Prepare the balance sheet as of November 30, 2018.

Match the accounting terminology to the definitions. 7. Cost principle a. oversees the creation and governance of accounting standards in the United States 8. GAAP b. requires an organization to be a separate economic unit 9. Faithful representation c. oversees U.S. financial markets 10. SEC d. states that acquired assets and services should be recorded at their actual cost 11. FASB e. creates International Financial Reporting Standards 12. Monetary unit assumption f. the main U.S. accounting rule book 13. Economic entity assumption g. assumes that an entity will remain in operation for the foreseeable future 14. Going concern assumption h. assumes that items on the financial statements are recorded in a monetary unit 15. IASB i. requires information to be complete, neutral, and free from material error

Consider the following accounting terms and definitions, and match each term to the definition:

1. Sole proprietorship

2. Faithful representation

3. Partnership

4. IFRS

5. Corporation

6. Audit

a. Set of global accounting guidelines, formulated by

the IASB

b. Holds that fair market value should not be used

over actual costs

c. Stands for Financial Accounting Standards Board

d. Owner is referred to as a proprietor

e. Asserts that accounting information should be

complete, neutral, and free from material error

7. Cost principle

8. FASB

9. Creditors

10. SEC

f. An examination of a company’s financial statements

and records

g. Has two or more owners (called partners)

h. U.S. governmental agency that oversees the U.S.

financial markets

i. Type of entity that is designed to limit personal

liability exposure of owners to the entity’s debts

j. Person or business lending money

See all solutions

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free