Sole Proprietorship - CORRECT ANSWER- ✔✔one owner
advantage: easy to form
separate entity for accounting purposes
not a separate entity for legal purposes or tax purposes
Partnership - CORRECT ANSWER- ✔✔two or more owners
separate entity for accounting purposes
not a separate entity for legal or tax purposes
Corporations - CORRECT ANSWER- ✔✔business incorporated under the laws of a
particular state.
Advantages: limited liability, continuity of life, ease in transfer of stock (ownership),
opportunity to raise large amounts of money by selling shares of stock to a large number of
people.
3 types of business activities - CORRECT ANSWER- ✔✔financing, investing, operating
Monetary Unity Assumption - CORRECT ANSWER- ✔✔Only transactions that can be
expressed in terms of money can be included in the accounting records
Economic Entity Assumption - CORRECT ANSWER- ✔✔Activities of the business are
separate from activities of the owners
Time Period Assumption - CORRECT ANSWER- ✔✔The long life of a company can be
reported over a series of shorter time periods. Makes it possible to prepare the Income
Statements for a specific time period.
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