© 2014 Cengage Learning. All Rights Reserved. Do Now ●Create a KWL Chart regarding corporations....
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Transcript of © 2014 Cengage Learning. All Rights Reserved. Do Now ●Create a KWL Chart regarding corporations....
© 2014 Cengage Learning. All Rights Reserved.
Do Now
● Create a KWL Chart regarding corporations. ● What do you know and what would you like to
know/are unsure about? ● Do not fill in the learned part yet!
● SIMULATION AUDIT TEST
SLIDE 1
© 2014 Cengage Learning. All Rights Reserved.
Merchandising Businesses
● Goods that a business purchases to sell are called merchandise.
● A business that purchases and resells goods is called a merchandising business.
● A merchandising business that sells to those who use or consume the goods is called a retail merchandising business.
● A wholesale merchandising business buys and resells merchandise primarily to other merchandising businesses, but sometimes sell to individual consumers
SLIDE 2
Lesson 9-1
LO1
© 2014 Cengage Learning. All Rights Reserved.
Pair & Share
● What are merchandising businesses that you know of in Robbinsville?
SLIDE 3
© 2014 Cengage Learning. All Rights Reserved.
Forming a Corporation
● A corporation is an organization with the legal rights of a person which many persons or other corporations may own.
● The assets or other financial resources available to a business are called capital.● One way a corporation obtains capital to operate
is by selling units of ownership in the company
SLIDE 4
LO2
Lesson 9-1
Continued on next slide.
© 2014 Cengage Learning. All Rights Reserved.
Forming a Corporation
● Each unit of ownership in a corporation is called a share of stock.
● The owner of one or more shares of stock is called a stockholder.
● The total shares of ownership in a corporation are called capital stock.
● Corporations can also borrow money to raise capital
SLIDE 5
LO2
Lesson 9-1
Continued on next slide.
Continued from previous slide.
© 2014 Cengage Learning. All Rights Reserved.
Forming a Corporation
● The articles of incorporation, a legal document that identifies basic characteristics of a corporation, is a part of the application submitted to a state to become a corporation. ● Include name and address of business, purpose,
limitations on activities, and rules for dissolving● A state approves the formation of a corporation
by issuing a charter, the legal right for a business to conduct operations as a corporation.
SLIDE 6
LO2
Lesson 9-1
Continued from previous slide.
© 2014 Cengage Learning. All Rights Reserved.
Proprietorship vs. Corporation
Proprietorship● Single capital and
drawing account for owner
● Accounting information kept separate from personal record of owners (Business Entity)
Corporation● Separate capital
accounts for stock issued and for earnings kept in business
● Accounting information kept separate from personal record of owners (Business Entity)
SLIDE 7
© 2014 Cengage Learning. All Rights Reserved.
Corporations
● Financial statements created for stockholders’ knowledge
● Exists independent of owners and expects to continue beyond owner’s lifetime and shares of stock may go to owner’s children in future● Going Concern accounting concept
SLIDE 8
© 2014 Cengage Learning. All Rights Reserved.
Group Activity
● Illustrate what makes a corporation a corporation, including visuals of the definitions previously mentioned
SLIDE 9
© 2014 Cengage Learning. All Rights Reserved.
Subsidiary Ledgers and Controlling Accounts
● A business from which merchandise, supplies, or other assets are purchased is called a vendor. ● Business must know amount owed to each vendor
to ensure it pays bills timely● A ledger that is summarized in a single general
ledger account is called a subsidiary ledger. ● Accountants often refer to a subsidiary ledger as a subledger.
SLIDE 10
LO3
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Subsidiary Ledgers and Controlling Accounts
● The subsidiary ledger containing vendor accounts is called an accounts payable ledger.● Total amount owed to vendors equals balance in Accounts
Payable general ledger account ● An account in a general ledger that summarizes all accounts
in a subsidiary ledger is called a controlling account.● Three-digit numbers for accounts payable ledger
● First digit identifies division in which controlling accounts appears in general ledger
● Next two digits unique to vendor● Accounts located by number or name in subsidiary ledger
SLIDE 11
LO3
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Subsidiary Ledgers and Controlling Accounts
SLIDE 12
LO3
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Subsidiary Ledger Form
SLIDE 13
LO3
Lesson 9-1
Same column headings
3Date
1 Account Name 2 Account Number
4 Balance
6 Account Balance
5 Check Mark
Accounts payable has normal credit balance , so it doesn’t need a debit balance column
© 2014 Cengage Learning. All Rights Reserved.
Think & Ink
● Why are these subsidiary ledgers necessary?
● If you had your own business, which method would you like better and why?
SLIDE 14
© 2014 Cengage Learning. All Rights Reserved.
Individual Activity
● Create your own controlling and subsidiary ledgers and assign account numbers to each of them
SLIDE 15
© 2014 Cengage Learning. All Rights Reserved.
Lesson 9-1 Audit Your Understanding
1. What is the primary difference between retail and wholesale merchandising businesses?
SLIDE 16
ANSWER
A retail merchandising business sells to those who use or consume the goods. A wholesale merchandising business buys and resells merchandise primarily to other merchandising businesses.
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Lesson 9-1 Audit Your Understanding
2. What allows a corporation to own property, incur liabilities, and enter into contracts in its own name?
SLIDE 17
ANSWER
A corporation, through the rights granted in its charter, has the legal rights of a person.
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Lesson 9-1 Audit Your Understanding
3. What is the principal difference between the accounting records of proprietorships and corporations?
SLIDE 18
ANSWER
Proprietorships have a single capital and drawing account for the owner. A corporation has separate capital accounts for the stock issued and for the earnings kept in the business.
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Lesson 9-1 Audit Your Understanding
4. What is the relationship between a controlling account and a subsidiary ledger?
SLIDE 19
ANSWER
The sum of the subsidiary ledger accounts is equal to the balance in the general ledger controlling account.
Lesson 9-1
© 2014 Cengage Learning. All Rights Reserved.
Lesson 9-1 Audit Your Understanding
5. What column on a general ledger form is not on an accounts payable ledger form?
SLIDE 20
ANSWER
Debit Balance
Lesson 9-1