Sole

proprietorship Partnership Corporation

Advantages:
Easier to form as compared to partnership Generally have uncomplicated business transactions and minimal regulatory requirements Only ONE OWNER Decisions can be arrived at in less time Enjoys all the profits earned

Disadvantages:

Limited ability to raise capital Can only expand in proportion to the increase in resources contributed by the owner Does not receive second opinion on decisions made Bears the risks and losses which may be incurred Unlimited personal liability for the debts

Advantages:
TWO OR MORE PERSONS Governed by the Civil Code of the Philippines Easy to organize as compared to a corporation The burden of management is usually shared among partners More ideas are exchanged and brainstormed

Disadvantages:

Can raise more capital however depends on the capability of each partner to invest resources The plurality of owners may result to disagreements regarding ideas and management style Life is fragile it may dissolved by agreement, withdrawal, death and incapacity Unlimited personal liability

Advantages:

Greatest capacity to raise capital Shareholders may transfer their shares without the need to obtain the consent of other shareholders May exist for a period not longer than 50 years, subject to renewal Limited liability of owners Composed of at least 5 natural persons (up to a maximum of 15)

Disadvantages:

Cost of forming and managing is relatively high Subject to greater scrutiny, regulation, control and supervision by the government Management is more complex Has limited powers, as expressly stated in the Corporation Code of the Philippines and its own Articles of Incorporation Subject to higher income tax rate

 Service

business Merchandising business Manufacturing business

Service Business

These

enterprises purchase good from suppliers and , without altering the state of the good, sell the same at a higher price than cost.

EXAMPLE

Merchandising Business
Purchase

goods from suppliers and, with out altering the state of the goods bought Sell at a higher price than cost

EXAMPLE

Manufacturing Business
Involves

the most complex

activities Sells goods at a higher price Produces the goods that it sells to customers

EXAMPLE

The American Accounting Association in its Statement of Basic Accounting Theory defines accounting as follows: Accounting is the process of identifying, measuring and communicating economic information to permit informed judgement and decision by users of the information.

American Institute of Certified Public Accountants defines accounting as follows: Accounting is the art of recording, classifying and summarizing, in a significant manner, and in terms of money, transactions and events which are in part at least of a financial character, and interpreting the results thereof.

Accounting Standards Council defines accounting as follows: Accounting function is information, nature, about intended to decisions. is a service activity. Its to provide quantitative primarily financial in economic entities, that is be useful in making

 Identifying - is the analytical component. Measuring - is the technical component. Communicating - is the formal component.

Indentifying This accounting process is the recognition or nonrecognition of business activities as accountable events.

Measuring This accounting process is the assigning of peso amounts to the accountable economic transactions and events.

Communicating The process of preparing and distributing accounting reports to potential users of accounting information.

Communicating Implicit in the communication process are the recording, classifying and summarizing aspects of accounting.

Recording or Journalizing The process of systematically maintaining a record of all economic business transactions after they have been identified and measured.

Classifying The sorting or grouping of similar and interrelated economic transactions into their respective classes.