1. BAT4m Unit 1: Review of Grade 11 Accounting September 8 2014

2.  A business can be formed in three different ways:  Proprietorship – one owner  Partnership – two or more owners  Corporation – Many owners Forms of Business Organization Forms of Business Organization

3.  In the early chapters of this text, we focus mostly on sole proprietorship.  Partnership and corporation will be discussed in Unit 4.  Until Unit 4, you do not need to know the details of how accounting method is different in each form of business. Accounting Equation Distinction by Type of Business Organization

4.  The main distinction between the forms of organization is found in  The terminology for owner’s equity section  The accounting of the owner’s investments and withdrawls  In a proprietorship, the company is owned by one person and the equity is termed owner’s equity. Accounting Equation Distinction by Type of Business Organization

5.  In partnership, the equity is termed “partners’ equity”.  In corporation, the owners are shareholders and the equity is called, “shareholders’ equity”  In Income Trust, owner’s equity is called, “unit holders’ equity” Accounting Equation Distinction by Type of Business Organization

6. Partnership Partners’ Equity Park, Capital$50,000 Michael, Capital$50,000 Total Partner’s Equity $100,000 Accounting for partnership

7. Corporation Shareholders’ equity: Share capital$800,000 Retained earnings$300,000 Total Shareholders’ equity$1100,000 Accounting for corporation

8.  In corporation, when owners want to invest their own money, they have to buy shares of the corporation.  These investments are grouped together and called share capital. These are usually the first item in SE section.  The second item in SE section is usually “Retained Earning”. Accounting for corporation

9.  RE are accumulated earning of the company which have been retained. (i.e. not paid out to shareholders as dividends)  Remember dividends? Similar to what?  Interest income for bankers.  Dividends are for shareholders.  When corporations want to give some portion of their net income, they will declare dividends such as $1 per share. Accounting for corporation

10.  Dividends are similar to drawing of owners in sole proprietorship business.  Dividends reduce the SE as drawings reduce OE in in sole proprietorship. Accounting for corporation

11.  What are 4 ways of changing OE or SE? 1. Drawings (declaring and paying out dividends) 2. Investment (issuing and selling more shares) 3. Revenue activity – as revenue account closes to income summary account 4. Expense activity – as expense account closes to income summary account. Quick Reviw

12.  On September 1, Facebook corporation issued and sold 10,000 shares at $50 per share. How will they record this transaction?  On October 1, If FB declared and paid out 50 cents dividend per share, how would they record this transaction? (50,000 shares outstanding) Issuing Shares

13.  P31 BE1-9  P41 P1-1b, p1-2b, p1-3BHomework