$ $ $ $ Key Terms Chapter 2 free enterprise system profit loss entrepreneur capital service business merchandising business manufacturing business sole proprietorship partnership corporation charter $ $ $

$ $ $ $ The Need for Profit The Need for a Risk-Taker Section 1 Exploring the World of Business (con’t.) Chapter 2 $ The Need for Profit The amount of money earned over and above the amount spent to keep the business operating is called profit. Businesses that spend more money than they earn operate at a loss. $ $ The Need for a Risk-Taker Entrepreneurs transform ideas for products or services into real-world businesses. $

$ $ $ $ Entrepreneurship: Who Me? Chapter 2 Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Entrepreneurship: Who Me? Have you ever considered owning a business? $ Cons You probably need to work long hours. You lose the security of steady wages and medical benefits an employer provides. You market your own services or products. You pay for your own operating expenses. You must be motivated and energetic each day. You face the possibility of losing money. Pros You are your own boss You create opportunities for earning money. You create and control your work schedule. You choose the people you serve. You select the people who work with you. You benefit from the rewards of your own hard work. You choose your own work hours. $ $

$ $ $ $ Types of Business Operations Chapter 2 Service Businesses Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Types of Business Operations Service Businesses Merchandising Businesses Manufacturing Businesses $ $ $

$ $ $ $ Forms of Business Organizations Chapter 2 Sole proprietorship Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Forms of Business Organizations $ Sole proprietorship Partnership Corporation $ $

$ $ $ $ Sole Proprietorship Chapter 2 A business owned by one person. Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Sole Proprietorship A business owned by one person. $ Advantages: Easy to set up Owner has total control Few regulations to follow Disadvantages: Limited expertise Hard to raise money Owner has all the risks Hard to attract talented employees $ $

$ $ $ $ Partnership Chapter 2 Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Partnership A business owned by two or more persons, who agree to operate the business as co-owners. $ Advantages: Easy to start Skills and talents are pooled More money available Disadvantages: Conflicts between partners Profits must be shared Owners share all risks $ $

$ $ $ $ Corporation Chapter 2 Section 1 Exploring the World of Business (con’t.) Chapter 2 $ Corporation A business organization that is recognized by law to have a life of its own. $ Disadvantages: Costs more to start up Complex to organize More regulations Higher taxes Advantages: Easier to raise money Easy to expand Easy to transfer ownership Losses limited to investment $ $

$ $ $ $ Why It’s Important Key Terms Chapter 2 Understanding accounting systems is the key to understanding business. $ Key Terms accounting system manual accounting system computerized accounting system GAAP financial reports financial reports financial accounting management accounting business entity accounting period going concern $ $

$ $ $ $ The Accounting System Chapter 2 Designed to collect, document, and report on financial transactions affecting the business. $ manual accounting system computerized accounting system generally accepted accounting principles (GAAP) financial reports $ $

Financial and Management Accounting Reports Chapter 2 $ How the Accounting System Works $ Inputs Source Documents Processing Tasks Outputs Financial and Management Accounting Reports Checks Invoices Sales Slips Receipts $ Analyzing Classifying Recording Financial Condition Results of operations Investments by and distributions to owners $

$ $ $ $ Using Accounting Reports for Making Business Decisions Chapter 2 Chapter 2 $ Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: $ individuals outside the business who have an interest in the business individuals inside the business $ $

$ $ $ $ Financial Accounting Who Uses Financial Accounting Reports? Chapter 2 Chapter 2 $ Financial Accounting Financial accounting focuses on reporting information to external users. $ Who Uses Financial Accounting Reports? $ potential investors banks that loan money to a business local, state, and federal governments workers, consumers, union leaders, and competitors $

$ $ $ $ Management Accounting Chapter 2 Chapter 2 Management accounting focuses on reporting information to management. $ $ Managers $

$ $ $ $ Accounting Assumptions Chapter 2 Chapter 2 business entity accounting period going concern $ $