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Business- a legally recognized organizational entity existing within an economically free
country designed to sell goods and/or provide services to consumers.

Profit-oriented enterprise- aims to earn income or profit through the provisions of goods
and/or services to consumers.

Non-profit-oriented enterprise- aims to achieve socio civic or charitable aims.

Forms of business Enterprises (according to nature of operations)

1. Service business or service concern- simplest form of business and provide services to
clients or customers in exchange for fees, rental, interest, or royalties.

2. Merchandising business or trading concern- purchase goods from suppliers and, without
altering the state of the goods bought sell the same at a higher price than cost.

3. Manufacturing business or manufacturing concern- involves the most complex activities

and actually produces the goods and it sells the customers.

Legal forms of business or business ownership

•Sole proprietorship- Most basic legal form of business and has only one owner.

Advantages:
1. Easier to form compared to partnerships and corporations.
2. Generally has uncomplicated transactions and minimal regulatory requirements.
3. Decisions can be arriving at in less time and implemented faster.
4. Proprietor enjoys all the profits earned by the business.

Disadvantages:
1. Proprietor faces financial problems because of the Enterprise’s Limited ability to raise
capital once volume of business increases.
2. Proprietor does not receive the benefit of second opinion on decisions made.
3. Proprietor bears the risks and losses which may be incurred in the business.
4. Proprietor has unlimited personal liability for the debts incurred by the business.

•Partnership- An association of two or more persons who bind themselves to contribute

money, property, or industry to a common fund with the intention of dividing the profits
among themselves.
-Partnerships are governed by the Civil Code of the Philippines
REVIEWE
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1. The financial statement that reports the revenues and expenses for a period of time such as a
year or a month is the
INCOME STATEMENT
2. The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a
specific date is the
BALANCE SHEET
3. Under the accrual basis of accounting, revenues are reported in the accounting period when the
SERVICE OR GOODS HAVE BEEN DELIVERED
4. Under the accrual basis of accounting, expenses are reported in the accounting period when the
EXPENSE MATCHES THE REVENUES OR IS USED UP
5. Revenues minus expenses equals
NET INCOME
6. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on
the balance sheet and are referred to as
ASSETS
7. Assets are usually reported on the balance sheet at which amount?
COST
8. Obligations (amounts owed) are reported on the balance sheet and are referred to as
LIABILITIES
9. Liabilities often have the word ___________ in their account title.
PAYABLE
10. Unearned Revenues is what type of account?
LIABILITIES
11. Accounting entries involve a minimum of how many accounts?
TWO
12. The listing of all of the accounts available for use in a company's accounting system is known as
the
CHART OF ACCOUNTS
13. Assets minus liabilities equals
OWNER’S EQUITY or STOCKHOLDER’S EQUITY
14. Which term is associated with "left" or "left-side"?
DEBIT
15. Which term is associated with "right" or "right-side"?
CREDIT
16. When cash is received, the account Cash will be
DEBITED
17. When a company pays a bill, the account Cash will be
CREDITED
18. What will usually cause an asset account to increase?
DEBIT
19. What will usually cause the liability account Accounts Payable to increase?
CREDIT
20. Entries to expenses such as Rent Expense are usually
DEBIT