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Questions 1. What are the three basic forms of business organizations? 2. What are the advantages to a business of being formed as a corporation? What are the disadvantages? 3. What are the advantages to a business of being formed as a partnership or sole proprietorship? What are the disadvantages? 4. "Accounting is ingrained in our society and is vital to our economic system." Do you agree? Explain. 5. Who are the internal users of accounting data? How does accounting provide relevant data to the internal users? 6. Who are the external users of accounting data? Give examples. 7. What are the three main types of business activity? Give examples of each activity. 8. Listed here are some items found in the financial statements of Ellyn Toth, Inc. Indicate in which fi- nancial statement(s) each item would appear. (a) Service revenue. (d) Accounts receivable. (b) Equipment. (e) Common stock. (c) Advertising expense. (f) Interest payable. 9. Why would a bank want to monitor the dividend payment practices of the corporations it lends money to? 10. "A company's net income appears directly on the in- come statement and the retained earnings statement, and it is included indirectly in the company's balance sheet." Do you agree? Explain. 11. What is the primary purpose of the state- ment of cash flows? 12. What are the three main categories of the statement of cash flows? Why do you think these categories were chosen? 13. What is retained earnings? What items increase the balance in retained earnings? What items decrease the balance in retained earnings? 14. What is the basic accounting equation? 15. (a) Define the terms assets, liabilities, and stockhold- ers' equity. (b) What items affect stockholders' equity? 16. Which of these items are liabilities of White Glove Cleaning Service? (a) Cash (c) Dividends. (b) Accounts payable. (d) Accounts receivable

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