Manufacturing Business
Buys raw materials (wood, iron, steel, oil) and transforms them
into a finished product
• Bakery• Paper Mill• Steel Mill• Oil Company
Sole ProprietorshipOne Owner
Advantages Disadvantages
• Easy to set up
• All profits go to the owner
• Owner has total control
• Few regulations to follow
• Limited expertise
• Hard to raise money
• Owner has all the risks
• Hard to attract talented employees
PartnershipsTwo or more owners
Advantages Disadvantages
• Easy to start
• Skills and talents are pooled
• More money available
• Conflicts between partners
• Profits must be shared
• Owners share all risks
CorporationsBusiness organization that is
recognized by law to have a life of its own
Advantages Disadvantages
• Easier to raise money
• Easy to expand
• Easy to transfer ownership
• Losses limited to investment
• Costs more to start up
• Complex to organize
• More regulation
• Higher taxes
Accounting System
Is designed to collect, document, and report financial transactions affecting the business.
Generally Accepted Accounting Principles
(GAAP)
A set of rules that all Accountants use to prepare their reports.
2 Groups use financial reports
1. External UsersFinancial Accounting - focuses on reporting information to external users.
Ex. Investors, Banks, Government
2. Internal UsersManagement Accounting - focuses on reporting information to internal users.
Ex. Managers, Owners
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