1. © 2014 Cengage Learning. All Rights Reserved. Do Now ●Create a KWL Chart regarding corporations. ●What do you know and what would you like to know/are unsure about? ●Do not fill in the learned part yet! ●SIMULATION AUDIT TEST SLIDE 1

2. © 2014 Cengage Learning. All Rights Reserved. Merchandising Businesses ●Goods that a business purchases to sell are called merchandise. ●A business that purchases and resells goods is called a merchandising business. ●A merchandising business that sells to those who use or consume the goods is called a retail merchandising business. ●A wholesale merchandising business buys and resells merchandise primarily to other merchandising businesses, but sometimes sell to individual consumers SLIDE 2 Lesson 9-1 LO1

3. © 2014 Cengage Learning. All Rights Reserved. Pair & Share ●What are merchandising businesses that you know of in Robbinsville? SLIDE 3

4. © 2014 Cengage Learning. All Rights Reserved. Forming a Corporation ●A corporation is an organization with the legal rights of a person which many persons or other corporations may own. ●The assets or other financial resources available to a business are called capital. ●One way a corporation obtains capital to operate is by selling units of ownership in the company SLIDE 4 LO2 Lesson 9-1 Continued on next slide.

5. © 2014 Cengage Learning. All Rights Reserved. Forming a Corporation ●Each unit of ownership in a corporation is called a share of stock. ●The owner of one or more shares of stock is called a stockholder. ●The total shares of ownership in a corporation are called capital stock. ●Corporations can also borrow money to raise capital SLIDE 5 LO2 Lesson 9-1 Continued on next slide. Continued from previous slide.

6. © 2014 Cengage Learning. All Rights Reserved. Forming a Corporation ●The articles of incorporation, a legal document that identifies basic characteristics of a corporation, is a part of the application submitted to a state to become a corporation. ●Include name and address of business, purpose, limitations on activities, and rules for dissolving ●A state approves the formation of a corporation by issuing a charter, the legal right for a business to conduct operations as a corporation. SLIDE 6 LO2 Lesson 9-1 Continued from previous slide.

7. © 2014 Cengage Learning. All Rights Reserved. Proprietorship vs. Corporation Proprietorship ●Single capital and drawing account for owner ●Accounting information kept separate from personal record of owners (Business Entity) Corporation ●Separate capital accounts for stock issued and for earnings kept in business ●Accounting information kept separate from personal record of owners (Business Entity) SLIDE 7

8. © 2014 Cengage Learning. All Rights Reserved. Corporations ●Financial statements created for stockholders’ knowledge ●Exists independent of owners and expects to continue beyond owner’s lifetime and shares of stock may go to owner’s children in future ●Going Concern accounting concept SLIDE 8

9. © 2014 Cengage Learning. All Rights Reserved. Group Activity ●Illustrate what makes a corporation a corporation, including visuals of the definitions previously mentioned SLIDE 9

10. © 2014 Cengage Learning. All Rights Reserved. Subsidiary Ledgers and Controlling Accounts ●A business from which merchandise, supplies, or other assets are purchased is called a vendor. ●Business must know amount owed to each vendor to ensure it pays bills timely ●A ledger that is summarized in a single general ledger account is called a subsidiary ledger. ●Accountants often refer to a subsidiary ledger as a subledger. SLIDE 10 LO3 Lesson 9-1

11. © 2014 Cengage Learning. All Rights Reserved. Subsidiary Ledgers and Controlling Accounts ●The subsidiary ledger containing vendor accounts is called an accounts payable ledger. ●Total amount owed to vendors equals balance in Accounts Payable general ledger account ●An account in a general ledger that summarizes all accounts in a subsidiary ledger is called a controlling account. ●Three-digit numbers for accounts payable ledger ●First digit identifies division in which controlling accounts appears in general ledger ●Next two digits unique to vendor ●Accounts located by number or name in subsidiary ledger SLIDE 11 LO3 Lesson 9-1

12. © 2014 Cengage Learning. All Rights Reserved. Subsidiary Ledgers and Controlling Accounts SLIDE 12 LO3 Lesson 9-1

13. © 2014 Cengage Learning. All Rights Reserved. Subsidiary Ledger Form SLIDE 13 LO3 Lesson 9-1 Same column headings 3 3 Date 1 1 Account Name 2 2 Account Number 4 4 Balance 6 6 Account Balance 5 5 Check Mark Accounts payable has normal credit balance, so it doesn’t need a debit balance column

14. © 2014 Cengage Learning. All Rights Reserved. Think & Ink ●Why are these subsidiary ledgers necessary? ●If you had your own business, which method would you like better and why? SLIDE 14

15. © 2014 Cengage Learning. All Rights Reserved. Individual Activity ●Create your own controlling and subsidiary ledgers and assign account numbers to each of them SLIDE 15

16. © 2014 Cengage Learning. All Rights Reserved. Lesson 9-1 Audit Your Understanding 1.What is the primary difference between retail and wholesale merchandising businesses? SLIDE 16 ANSWER A retail merchandising business sells to those who use or consume the goods. A wholesale merchandising business buys and resells merchandise primarily to other merchandising businesses. Lesson 9-1

17. © 2014 Cengage Learning. All Rights Reserved. Lesson 9-1 Audit Your Understanding 2.What allows a corporation to own property, incur liabilities, and enter into contracts in its own name? SLIDE 17 ANSWER A corporation, through the rights granted in its charter, has the legal rights of a person. Lesson 9-1

18. © 2014 Cengage Learning. All Rights Reserved. Lesson 9-1 Audit Your Understanding 3.What is the principal difference between the accounting records of proprietorships and corporations? SLIDE 18 ANSWER Proprietorships have a single capital and drawing account for the owner. A corporation has separate capital accounts for the stock issued and for the earnings kept in the business. Lesson 9-1

19. © 2014 Cengage Learning. All Rights Reserved. Lesson 9-1 Audit Your Understanding 4.What is the relationship between a controlling account and a subsidiary ledger? SLIDE 19 ANSWER The sum of the subsidiary ledger accounts is equal to the balance in the general ledger controlling account. Lesson 9-1

20. © 2014 Cengage Learning. All Rights Reserved. Lesson 9-1 Audit Your Understanding 5.What column on a general ledger form is not on an accounts payable ledger form? SLIDE 20 ANSWER Debit Balance Lesson 9-1

21. © 2014 Cengage Learning. All Rights Reserved. Your Turn ●As a class, let’s complete 9-1 Work Together ●Closure: ●Finish your KWL Chart! SLIDE 21