Q. Corporate accounting and accounting for sole proprietorship?

Several textbook authors use a sole proprietorship and a partnership form of business ownership to exemplify accounting concepts and practices. In a study of users and nonusers of our text we learned that the majority preferred the corporate approach because most students will probably work for or invest in corporations. As well many small businesses operate as corporations because of the investors' desire for limited liability.

This appendix temporarily describes the differences in accounting for these three forms of business ownership. The main difference is in the stockholders' equity or owner's equity section of the balance sheet.

Since you learned in this section the stockholders' equity section of the balance sheet for a corporation consists of capital stock and retained earnings. The owner's equity segment of the balance sheet for a sole proprietorship consists only of the owner's capital account. The owner's equity segment of a partnership is similar to that of a single proprietorship except that it shows a capital account and its balance for each partner.