Accounting Paper 9

Describe the primary forms of business organization.

  Sole Proprietorship
    ■ Business owned by one person
    ■ Simple to establish
    ■ Owner controlled
    ■ Tax advantages
    ■ Owner personally liable (responsible)
    ■ Financing difficult

  Partnership
    ■ Two or more owners
    ■ Simple to establish
    ■ Shared control
    ■ Broader skills & resources   توسيع نطاق المهارات والموارد
    ■ Tax advantages
    ■ Personal liability

  Corporation
    ■ Separate legal entity owned by stockholders
    ■ Easy to transfer ownership
    ■ Greater capital raising potential
    ■ Lower legal liability
    ■ Unfavorable tax treatment

1. Identify the users and uses of accounting information.

Internal:
    ■ Managers who plan, organize and run a business
        ■ Marketing managers
        ■ Production supervisors
        ■ Finance directors
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External:
    ■ Investors
    ■ Creditors الدائنين
        ■ Tax authorities
        ■ Customers
        ■ Economic planners

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2. Explain the three principal types of business activity.

Financing Activities
    ■ Borrowing creates liability (responsibility) الاقتراض يخلق المسؤولية
        ■ Bank loans
        ■ Goods on credit or payables

    ■ Selling stock creates stockholders’ equity
  (Fairness of the stockholders, their rights)

Investing Activities
    ■ Obtaining resources or assets to operate the business
        ■ Land
        ■ Buildings
        ■ Vehicles
        ■ Computers

Operating Activities
    ■ Primary activity of   business
        ■ Selling goods
        ■ Providing services
        ■ Advertising
        ■ Paying employees

  Revenues (ربح ) are the increases in assets resulting from the sale of a product or service.

  Expenses are the cost of assets consumed or services used in generating revenue.

  If revenue > expense = Net Income
  If revenue < expense = Net Loss!

3. Explain the meaning... [continues]

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