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    Accounting, Business Types

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    Please provide an answer to the following questions below that contains 250 to 300 words for each.

    1. Compare the three forms of business entities: corporation, partnership and sole proprietor. What are the advantages and disadvantages or each form of entity? Share with the class your experience with the different forms of entities.

    2. Define assets, liabilities and stockholders' equity. List different assets, liabilities and stockholders' equity that can be found in your place of work or in your personal life.

    3. What is the basic accounting equation? Explain how does the Retained earnings statement relate to the Income statement and Balance sheet?


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    Solution Preview

    1. The sole proprietorship is a form of business where there is one owner who assumes all the responsibility of a company. An example would be a barber who sets up shop simply by applying for a business license and hanging a sign in his front window. The advantages of this form of business include the ease of entry including low start up costs. In addition, earnings are taxed only once as income to the owner. The disadvantages include the unlimited liability of the company's owner-if the company goes bankrupt, the owner's assets could be at stake as well.

    The partnership form of business is similar to the sole proprietorship except that instead of having a single owner, two or more owners are present. The advantages of this form of business include the relative ease of start up and the single taxation associated with it. The disadvantages include, similar to the sole proprietorship, the unlimited liability of all owners.

    The corporation form is a bit more complex. The company is a separate legal entity and can perform similar functions as a human including entering into legal agreements. The company is set up by having stock issued to the owners or shareholders. The advantages of this form of business includes the limited liability of shareholders. If the company bankrupts, ...

    Solution Summary

    The solution describes different business types, the accounting equation, and defines assets, liabilities, and equity.