The purpose of this blog is to explain accounting concepts, answer your questions, and review for tests. You will be doing the explaining much of the time, as one of the best ways to learn a subject is to teach it!
However, I'm going to teach the first lesson, which covers the definition of accounting and basic forms of business ownership. You can review this blog whenever you need a refresher on these concepts!
Accounting by definition is the art of analyzing, recording, summarizing, reporting, reviewing, and interpreting financial information. In order to illustrate and understand what is actually being recorded and summarized in an automated accounting system, this class will illustrate the manual method of recording financial information.
The four basic legal forms of ownership for small businesses are a Sole Proprietorship, Partnership, Corporation, and Limited Liability Company. There are advantages and disadvantages associated with each type of organization.
- Sole Proprietorship
Most small business start out as sole proprietorships. These firms are owned by one person who is normally active in running and managing the business. - Partnership
A partnership is two or more people who share the ownership of a single business. In order to avoid misunderstandings about how profits/losses are shared , who's responsible for what, and other management, ownership, and operating decisions the partners normally have a formal legal partnership agreement. - Corporation
A corporation is an organization that is made up of many owners who normally are not active in the decision making and operations of the business. These owners are called shareholders or stockholders. Their ownership interest is represented by certificates of ownership (stock) issued by the corporation.
- Limited Liability Company (LLC)
The LLC is a relatively new type of business structure that combines the benefits of a partnership and corporation.
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