Accounting

Sole Proprietorship

A business owned by one person, simple to set up, owner-controlled, with tax advantages.

Partnership

A business owned by two or more persons associated as partners, often formed for sharing control and resources.

Corporation

A business organized as a separate legal entity owned by stockholders, with limited liability and easier transfer of ownership.

Sole Proprietorship Tax Advantages

Typically receives more favorable tax treatment compared to corporations.

Hybrid Forms of Organization

Business structures combining tax advantages of partnerships with limited liability of corporations.

Limited Liability Company (LLC)

A hybrid business form combining the benefits of a corporation and partnership.

Debt Financing

Borrowing money from external sources to raise funds for business operations.

Equity Financing

Raising money by issuing shares of stock to investors in exchange for cash.

Revenue

The increase in assets or decrease in liabilities resulting from the sale of goods or services.

Expenses

The costs of assets consumed or services used in the process of generating revenues.

Net Income

The result when revenues exceed expenses, indicating a profit.

Net Loss

The result when expenses exceed revenues, indicating a loss.

Internal Users

Managers who use accounting information for decision-making within a company.

External Users

Individuals outside the company who use financial information to make decisions, such as investors and creditors.

Sarbanes-Oxley Act (SOX)

Legislation aimed at reducing unethical corporate behavior and enhancing financial reporting reliability.

Accounts Payable

Obligations to pay suppliers for goods or services purchased on credit.

Assets

Resources owned by a business, necessary for operation.

Liabilities

Amounts owed to creditors, including debt and other obligations.

Taxes

Payments required from businesses to the government based on financial performance.