WHY IS

ACCOUNTING A
LANGUAGE OF
BUSINESS?
 [thru] FINANCIAL
STATEMENTS

COMMUNICATE

Decision(s)
THE DECISION
BUSINESS MAKERS
(Users of Financial
Information)
 TOPICS:
 Forms of Business Organization
 Business According to Activities
BUSINESS  

TOPICS:
 What is Financial Statement(s)
 Principles of Accounting
 When to prepare the Financial
Statements.
 Qualities of a Financial Statements
THE FINANCIAL  Accounting Information or Branches of
STATEMENTS Accounting.
 TOPICS:
 

The internal Users

The external Users
THE DECISION
MAKERS
(Users of Financial
Information)
PART 1:
THE BUSINESS?
FORMS OF NATURE
BUSINESS OF
ORGANIZA BUSINESS
-TION ACTIVITY

BUSINESS
 FORMS OF BUSINESS ORGANIZATION

SOLE
PROPRIETORSHIP PARTNERSHIP CORPORATION COOPERATIVE
SOLE PROPRIETORSHIP

• This is the simplest form of business organization

• capital is owned and provided by one person called Proprietor
• The owner may manage the business by himself or hire another
person to do so.
• Whatever happens to the business, whether it succeeds or fails,
the owner has to bear it all including any unpaid obligations
that the business may have incurred.
• That is the reason why the business itself does not file and pay
income tax.
• The net income of the business is reported in the owner's
personal income tax return.
• As there is only one owner in the sole proprietorship business,
the capital account is called "Owner's Equity".
SOLE PROPRIETORSHIP

ADVANTAGES DISADVANTAGES
There are minimal costs and Resources are limited as the capital
requirements in the formation is provided only by the owner.
The owner can withdraw the assets The liability of the owner is
and profits of the business anytime unlimited as he or she is
at his or her own discretion. accountable to all creditors of the
business.
Decision making is solely in the Infusion of knowledge in the
hands of the owner. management of the business is
limited to one person only.
The duration of the life of the  
business solely on its owner.
SOLE PROPRIETORSHIP
SOLE PROPRIETORSHIP

Legal Requirement

The sole proprietorship is the easiest business to

register. It is registered with the Department of
Trade and Industry (DTI) under its Bureau of
Trade Regulation and Consumer Protection.
 
 PARTNERSHIP

• is a business organization owned and managed by two or

more people who agree to contribute money, property, or
industry to a common fund for the purpose of earning
profit.

• partnership is merely a contract, it can be terminated

anytime.

• One cannot be admitted in the partnership without the

consent of other partners. As these are two or more partners,
the capital account is called "Partners Equity".
PARTNERSHIP
 PARTNERSHIP
ADVANTAGES
There are minimal costs and
requirements in the formation
There are more funds contributed
from the investment of the partners. liability if the other partners are
There is infusion of more knowledge,
experience, and skills from two or
more partners
There can be division of labor
between or among partners.
DISADVANTAGES
The partners are liable for the
actions of each partner as a result of
mutual agency.
A general partner has unlimited
limited partners or are insolvent.
Disagreement between or among
partners can lead to the withdrawal
The death, retirement, withdrawal,
or incapacity of a partner results in
the dissolution of the partnership.
PARTNERSHIP
 PARTNERSHIP

Legal Requirement
For the partnership, the business is registered with the
Securities and Exchange Commission (SEC) upon submission
of the following documents:
• Proposed Article of Partnership
• Name Verification Slip
• Bank Certificate Deposit
• Alien Certificate of Registration, Special Investors Resident Visa
or proof of other types of visa (in case of foreigners)
• Proof of Inward Remittance (in case of non-resident alien)
 
 CORPORATION

• This is the biggest and most complicated form of business

organization

• This is organized by at least five (5) but not more than fifteen
natural persons called Incorporators.

• Corporation, capital is called Share Capital.

• the capital is called Shareholder's Equity.

 CORPORATION
ADVANTAGES
The stockholders only have limited
liability, as their liability extends only
up to the amount of their capital
investment
A corporation has continuous
existence as its life is indefinite.
There is more infusion of funds from
the stockholders or investors.
Share of stocks can be transferred
without the consent of the other
shareholders
DISADVANTAGES
A corporation entails many
requirements and is more costly than a
partnership.
The government exercises strict
control over corporations and imposes
high taxes.
Shareholders have little or no
participation in the management of the
corporation.
Distribution of net income depends
upon the declaration of dividends by
the board of directors.
CORPORATION
 CORPORATION

Legal Requirement
For the corporation, the following are the incorporation
documents required to be filed with the Securities and
Exchange Commission (SEC):
• Articles of Incorporation
• By-laws
• Treasurer’s Affidavit which should state compliance
with the authorized subscribed and paid-up capital
stock requirements.
• Bank Certificate which should state that the paid-up
capital portion of the authorized capital stock has
been deposited to the issuing bank.
 
 COOPERATIVE

• This is formed by fifteen (15) or more natural persons who are

Filipino citizen, of legal age, having a common bond of interest
and are actually residing or working in the intended area of
operation.

• it operates similar to corporation.

• It has its Board of Directors who are elected among its

members. The General Assembly shall be the highest policy-
making body of the Cooperatives.

• the capital account is called Members' Equity.

 COOPERATIVE

ADVANTAGES
The prices of the products offered to
consumers are lower due to direct
purchases of cooperative members
from producers or manufacturers.
Cooperatives are managed by the
managed by the members themselves;
thus, saving on management costs
which leads to lower prices of products
inuring to the benefit of the
consumers.
 
DISADVANTAGES
There is limited capital due to
underprivileged members
The cooperative is strictly for members
only and shares cannot be transferred
to non-members.
Lack of efficient management as it is
management only by its members.
COOPERATIVE
 COOPERATIVE

Legal Requirement
For a cooperative, the business is registered with the
Cooperative Development Authority (CDA) upon
submission of the following documents:
• Economic Survey
• Notarized Articles of Cooperation and By-Laws
• Bonds of accountable officer of officers
• Notarized sworn statement of the treasurer certifying
that the required subscription and payment of the
authorized share capital have been fulfilled.
 
 BUSINESS ACCORDING TO ACTIVITIES

MERCHANDISING HYBRID COMPANY

SERVICE CONCERN MANUFACTURING
 SERVICE CONCERN

the business derived its in the case of non-

income from services professional services, like:
rendered to clients
• hotel where room rental
• Accountants is the main line of their
• Lawyers business
• Doctors • laundry shop,
• Dentists • car repair services,
• janitorial services,
• internet cafe, etc.
 MERCHANDISING CONCERN

the business is engaged in buying goods

or commodities or any form of finished
products and sells them at a profit.

BUYING AND SELLING

It might be at a retail or wholesale basis.
Grocery stores are best example of this nature
of business. It also includes food and beverage
sold in restaurants and related establishments.
 MANUFACTURING

the business is engaged in buying of raw

materials and supplies to be processed or
manufactured, converting them into finished
products for sale at a profit, like that of a
furniture shop, manufacturers of cars and home
appliances, etc. are no exceptions, Bakeries etc.
 HYBRID COMPANIES

are those involved in more than one type of activity

which are manufacturing, merchandising and
service. The trend of our business establishments
nowadays is more of hybrid companies wherein you
can hardly identify as to what activities they are
engaged in
For example, a hotel operating with a restaurant
Hotel industry deals with services while restaurants
are mixture of manufacturing and merchandising.
Free write:
END