Generally Accepted Accounting Principles and Cash Flows- Cash Essay

Submitted By TarahWooten1
Words: 515
Pages: 3

Chapter 1 Continuing Problem
ACCT 201

Sole-proprietorship and Partnership- An advantage would be that any income the company makes is only taxed once. A disadvantage to having one of these two forms of business is the loss of personal assets due to the inability of the company to pay it's legal obligations to creditors. Corporation- One advantage of a corporation is the limited liability of stockholder's. This means that the stockholder's are not responsible for the corporations financial obligations because it is it's own entity. Double taxation is a disadvantage to this for of business, because any income that the company makes is taxed twice. First, the corporations income is taxed and second, the stockholder's have to pay taxes on any dividends that were distributed to them as a result of the corporations income. Because Tony and Suzie both want to start this business, I would recommend a partnership. They could split start-up costs and work together to help their business prosper. Finance activities would be external funding used to get the business going. There are two forms; the owners investing in their own company and creditors lending money to the company. Investing activities follow the financing activities. The investing activities include the purchase of long-term resources like land, buildings, and machinery. This also includes any resources that are purchased but not directly related to the company's normal operations. Operating activities are transactions related to the operations of the company. These transactions include the products and services provided to costumers, such as kayaking, mountain biking, rock climbing, etc. Other operating activities would be costs of running the business. Some these costs include utilities, taxes, advertising, rent, etc. Assets- Cash, Accounts Receivable, Supplies, Equipment, Buildings, etc. Liabilities- Accounts Payable, Salaries Payable, Interest Payable, Utilities Payable, Notes Payable. Stockholder's Equity- Common Stock, Retained Earnings. Revenues- Service Revenue Expenses- Salaries Expense, Rent Expense, Supplies Expense, Interest Expense, Utilities Expense, Other Expenses. Income Statement: Reports the company's revenues and expenses over a certain period of time. This statement will tell you in