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Corporate accounting financial
statements
The corporate accounting
financial
statements produced for corporations are basically
the same as the statements produced for the sole proprietorship,
partnership
in most areas. There are very few, if any changes
in the assets and liabilities sections. There are
major changes in the equity of the section of the
balance sheet. A corporation is very different from
the other forms of organization. A corporation is
a legal entity in itself, given a life in the state
in which it is incorporated. Since the corporation
has a life, it can be taken to court and can enter
into long-term contracts, which is not possible to
do in the case of partnerships and sole proprietorships.
Advantages and Disadvantages
of corporation
Advantages
The advantages of
incorporation include limited liability. This is very
important because it limits the potential losses of
the owners to the amount of their original investments.
The advantage of the corporation is that it has unlimited
life. The life of a sole proprietorship or partnership
is limited to the lives of the owners. Another advantage
of the corporate form of organization is its ease
in acquiring capital. The corporation also benefits
from professional management.
The corporation is organized differently from the
sole proprietorship or partnership in that a professional
management team runs it and its owners are usually
uninvolved in day-to-day management.
Disadvantages
Disadvantages of the
corporate form of business
include double taxation, which can be a severe disadvantage.
Since corporations are legal entities, they are required
to pay taxes on their profits. Later when the profits
are distributed to the owners as dividends, the owners
must pay taxes again. The issue of taxation is a complex
one; further discussion of it is beyond our scope.
Regulation another disadvantage of the corporate form
of business. Federal and state government agencies
require many more reports of corporations than they
require of other business forms. Taxes
The corporation is the only form of business that pays
taxes on profits. In sole proprietorships, partnerships, and LLCs, the owners
pay taxes only on their personal tax returns.
Dividends
Dividends are paid out of the company’s accumulated
earnings and available to stockholders only when the board of directors
declares dividends. There are four important dividend dates relating to cash
dividends.
Ø The
date of declaration
Ø The
date of record
Ø The
ex-dividend date
Ø The
date of payment
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