Introduction

This chapter  introduces the three forms of business – sole proprietorship, partnership and company – that we see in society, providing a description of the characteristics of each form of business structure and how equity is recorded and reported in each business structure. It then examines the accounting for partnerships and shareholders’ equity. This is followed by an examination of how the corporate form of business account for issuing shares and cash or share dividends distributed on those shares. Lastly interesting aspects of shares such as share buybacks are explored.

Chapter outline

After reading this chapter, you should be able to:

1. Explain the three major forms of business structures
2. Describe the characteristics of each form of business structure
3. Describe the characteristics of equity and how it is recorded and reported in each business structure
4. Describe various business transactions that can happen in a partnership
5. Describe various business transactions that can happen in a company
6. Understand how cash and share dividends are issued
7. Describe the characteristics of share buybacks and how they are recorded and reported.