CHAPTER 1

Uses of Accounting Information and the

Financial Statements

REVIEWING THE CHAPTER

Objective 1: Define accounting and describe its role in making informed decisions, identify
business goals and activities, and explain the importance of ethics in accounting.
1. Accounting is an information system that measures, processes, and communicates financial
information about an identifiable economic entity. It provides information that is essential for
decision making.
2. A business is an economic unit that sells goods and services at prices that will provide an
adequate return to its owners. To survive, a business must meet two goals: profitability, which
means earning enough income to attract and hold investment capital, and liquidity, which means
keeping sufficient cash on hand to pay debts as they fall due.
3. Businesses pursue their goals by engaging in operating, investing, and financing activities.
a. Operating activities are the everyday activities needed to run the business, such as hiring
personnel; buying, producing, and selling goods or services; and paying taxes.
b. Investing activities spend the funds raised. They include such activities as buying and
selling land, buildings, and equipment.
c. Financing activities are needed to obtain funding for the business. They include such
activities as obtaining capital from owners and creditors, paying a return to owners, and
repaying creditors.
4. Performance measures indicate the extent to which managers are meeting their business goals
and whether the business activities are well managed. Performance measures thus often serve as
the basis for evaluating managers. Examples of performance measures include cash flow (for
liquidity), net income or loss (for profitability), and the ratio of expenses to revenue (for operating
activities).
5. A distinction is usually made between management accounting, which focuses on information
for internal users, and financial accounting, which involves generating and communicating
accounting information in the form of financial statements to persons outside the organization.
6. Accounting information is processed by bookkeeping, computers, and management information
systems.
a. A small but important part of accounting, bookkeeping is the mechanical and repetitive
process of recording financial transactions and keeping financial records.
b. The computer is an electronic tool that rapidly collects, organizes, and communicates vast
amounts of information. The computer does not take the place of the accountant, but the
accountant must understand how the computer operates because it is an integral part of the
accounting information system.

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2 Chapter 1: Uses of Accounting Information and the Financial Statements

c. A management information system (MIS) is an information network of all major

functions (called subsystems) of a business. The accounting information system is the
financial hub of the management information system.
7. Ethics is a code of conduct that addresses the question of whether an individual’s actions are right
or wrong. Users depend on management and its accountants to act ethically and with good
judgment in the preparation of financial statements. This responsibility is often expressed in the
report of management that accompanies financial statements.
8. The intentional preparation of misleading financial statements is called fraudulent financial
reporting. It can result from the distortion of records, falsified transactions, or the misapplication
of accounting principles. Individuals who perpetrate fraudulent financial reporting are subject to
criminal and financial penalties.
9. In 2002, Congress passed the Sarbanes-Oxley Act to regulate financial reporting and the
accounting profession. A key provision of this legislation requires chief executives and chief
financial officers of all publicly traded U.S. companies to swear (based on their knowledge) that
the quarterly statements and annual reports filed with the SEC are accurate and complete.
Objective 2: Identify the users of accounting information.
10. The users of accounting information basically fall into three groups: management, outsiders with a
direct financial interest in the business, and outsiders with an indirect financial interest.
a. Management steers a business toward its goals by making the business’s important
decisions. Specifically, management must ensure that the business is adequately financed;
that it invests in productive assets; that it develops, produces, and markets goods or services;
that its employees are well managed; and that pertinent information is provided to decision
makers.
b. Present or potential investors and creditors are considered outside users with a direct
financial interest in a business. Most businesses publish financial statements that report on
their profitability and financial position. Investors use these statements to assess the
business’s strength or weakness; creditors use them to determine the business’s ability to
repay debts on time.
c. Society as a whole, through government officials and public groups, can be viewed as an
accounting information user with an indirect financial interest in a business. Such users
include tax authorities, regulatory agencies, and other groups, such as labor unions,
economic planners, and financial analysts. Among the regulatory agencies is the Securities
and Exchange Commission (SEC), an agency of the federal government set up by
Congress to protect the investing public by regulating the issuing, buying, and selling of
stocks in the United States.
11. Managers in government and not-for-profit organizations (hospitals, universities, professional
organizations, and charities) also make extensive use of financial information.
Objective 3: Explain the importance of business transactions, money measure, and separate
entity.
12. To make an accounting measurement, the accountant must answer the following basic questions:
a. What is measured?
b. When should the measurement be made?
c. What value should be placed on the item being measured?
d. How should what is measured be classified?

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 Chapter 1: Uses of Accounting Information and the Financial Statements 3

13. Financial accounting uses money measures to gauge the impact of business transactions on
specific business entities.
a. Business transactions are economic events that affect a business’s financial position. They
can involve an exchange of value (e.g., a purchase, sale, payment, collection, or loan) or a
“nonexchange” (e.g., the physical wear and tear on machinery, and losses due to fire or
theft).
b. The money measure concept states that business transactions should be measured in terms
of money. Financial statements are normally prepared in terms of the monetary unit of the
country in which the business resides (i.e., in dollars, euros, etc.). When transactions occur
between countries that have different monetary units, the appropriate exchange rate, or the
value of one currency in terms of another, must be used to translate amounts from one
currency to another.
c. For accounting purposes, a business is treated as a separate entity, distinct from its owner
or owners, creditors, and customers—that is, the business owner’s personal bank account,
resources, debts, and financial records should be kept separate from those of the business.
Objective 4: Identify the three basic forms of business organization.
14. The three basic forms of business organization are sole proprietorships, partnerships, and
corporations. Accountants recognize each form as an economic unit separate from its owners.
A sole proprietorship is an unincorporated business owned by one person. The owner receives
all profits, absorbs all losses, and is personally liable for all debts of the business.
A partnership is an unincorporated business owned and managed by two or more persons. The
owners share profits and losses according to a predetermined formula. In some cases, one or more
partners limit their liability for the business’s debts, but at least one partner must have unlimited
liability.
A corporation is a business unit chartered by the state and legally separate from its owners (the
stockholders). Corporations are run by a board of directors, who are elected by the stockholders.
Stockholders enjoy limited liability (i.e., their risk of loss is limited to the amount they paid for
their shares), and ownership of stock can be transferred without affecting operations. The
corporation is the dominant form of American business because it enables companies to amass
large quantities of capital.
Objective 5: Define financial position, and state the accounting equation.
15. Every business transaction affects a firm’s financial position. Financial position (a company’s
economic resources and the claims against those resources) is shown by a balance sheet, so called
because the two sides of the balance sheet must always equal each other. In a sense, the balance
sheet presents two ways of viewing the same business: the left side shows the assets (resources) of
the business, whereas the right side shows who provided the assets. Providers consist of owners
(listed under “owner’s equity”) and creditors (represented by the listing of “liabilities”).
Therefore, it is logical that the total dollar amount of assets must equal the total dollar amount of
liabilities and owner’s equity. This is the accounting equation, which is formally stated as
Assets = Liabilities + Owner’s Equity
Another correct form is
Assets – Liabilities = Owner’s Equity

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4 Chapter 1: Uses of Accounting Information and the Financial Statements

16. Assets are the economic resources of a business that are expected to benefit future operations.
Examples of assets are cash, accounts receivable, inventory, buildings, equipment, patents, and
copyrights.
17. Liabilities are a business’s present obligations to pay cash, transfer assets, or provide services to
other entities in the future. Examples of such debts are money owed to banks, amounts owed to
creditors for goods bought on credit, and taxes owed to the government.
18. Owner’s equity represents the claims by the owners of a business to the assets of the business. It
equals the residual interest in assets after deducting the liabilities. Because it is equal to assets
minus liabilities, owner’s equity is said to equal the net assets of the business.
19. Owner’s equity is affected by four types of transactions. Owner’s investments increase owner’s
equity. Revenues, which result from selling goods and services, also increase owner’s equity.
Expenses, which represent the costs of doing business, decrease owner’s equity, as do owner’s
withdrawals. When its revenues exceed its expenses, a company has a net income. When its
expenses exceed its revenues, a company has suffered a net loss.
Objective 6: Identify the four basic financial statements.
20. Accountants communicate information through financial statements. The four principal statements
are the income statement, statement of owner’s equity, balance sheet, and statement of cash flows.
21. Every financial statement has a three-line heading. The first line gives the name of the company.
The second line gives the name of the statement. The third line gives the relevant dates (the date
of the balance sheet or the period of time covered by the other three statements).
22. The income statement, whose components are revenues and expenses, is perhaps the most
important financial statement. Its purpose is to measure the business’s success or failure in
achieving its goal of profitability.
23. The statement of owner’s equity relates the income statement to the balance sheet by showing
how the owner’s capital changed during the accounting period. The owner’s capital at the
beginning of the period is the first item on the statement. Because net income belongs to the
owner, it is added to beginning capital, as are any additional investments that the owner made
during the period. Finally, any owner’s withdrawals during the period are subtracted, as is a net
loss, to arrive at the owner’s capital at the end of the period. This ending figure is then stated as
the owner’s capital on the balance sheet.
24. The balance sheet shows the financial position of a business as of a certain date. The resources
owned by the business are called assets; debts of the business are called liabilities; and the
owners’ financial interest in the business is called stockholders’ equity. The balance sheet is also
known as the statement of financial position.
25. The statement of cash flows focuses on the business’s goal of liquidity and contains much
information not found in the other three financial statements. It discloses the cash flows that result
from the business’s operating, investing, and financing activities during the accounting period.
Cash flows refer to the business’s cash inflows and cash outflows. Net cash flows represent the
difference between these inflows and outflows. The statement of cash flows indicates the net
increase or decrease in cash produced during the period.
Objective 7: Explain how generally accepted accounting principles (GAAP) relate to financial
statements and the independent CPA’s report, and identify the organizations that influence
GAAP.

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 Chapter 1: Uses of Accounting Information and the Financial Statements 5

26. Generally accepted accounting principles (GAAP) are the set of conventions, rules, and
procedures that constitute acceptable accounting practice at a given time. The set of GAAP
changes continually as business conditions change and practices improve.
27. The financial statements of publicly held corporations are audited (examined) by licensed
professionals, called certified public accountants (CPAs), to ensure the quality of the
statements. CPAs must be independent of their audit clients (without financial or other ties). On
completing the audit, the CPA reports on whether the audited statements “present fairly, in all
material respects” and are “in conformity with generally accepted accounting principles.”
28. The Public Company Accounting Oversight Board (PCAOB) is a governmental body created
by the Sarbanes-Oxley Act to regulate the accounting profession.
29. The Financial Accounting Standards Board (FASB) is the authoritative body for development
of GAAP. This group is separate from the AICPA and issues Statements of Financial Accounting
Standards.
30. The American Institute of Certified Public Accountants (AICPA) is the professional
association of CPAs. Its senior technical committees help influence accounting practice.
31. The Securities and Exchange Commission (SEC) is an agency of the federal government. It has
the legal power to set and enforce accounting practices for companies whose securities are traded
by the general public.
32. The Governmental Accounting Standards Board (GASB) was established in 1984 and is
responsible for issuing accounting standards for state and local governments.
33. The International Accounting Standards Board (IASB) is responsible for developing
international accounting standards used in many countries throughout the world.
34. The Internal Revenue Service (IRS) enforces and interprets the set of rules governing the
assessment and collection of federal income taxes.
35. Ethics is a code of conduct that applies to everyday life. Professional ethics is the application of a
code of conduct to the practice of a profession. The accounting profession has developed such a
code, intended to guide the accountant in carrying out his or her responsibilities to the public. In
short, the accountant must act with integrity, objectivity, independence, and due care.
a. Integrity means that the accountant is honest, regardless of consequences.
b. Objectivity means that the accountant is impartial in performing his or her job.
c. Independence is the avoidance of all relationships that impair or appear to impair the
objectivity of the accountant, such as owning stock in a company he or she is auditing.
d. Due care means carrying out one’s responsibilities with competence and diligence.
36. The Institute of Management Accountants (IMA) has adopted a code of professional conduct
for management accountants. This code emphasizes that management accountants have
responsibilities in the areas of competence, confidentiality, integrity, and objectivity.
37. The much-publicized financial scandals of some major U.S. corporations have highlighted the
importance of corporate governance, or the oversight of a corporation’s management and ethics
by its board of directors. To strengthen corporate governance, the Sarbanes-Oxley Act requires all
public corporations to establish an audit committee, which is the front line of defense against
fraudulent financial reporting. One of the audit committee’s functions is to engage independent
auditors and review their work.

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6 Chapter 1: Uses of Accounting Information and the Financial Statements

38. Ratios are used to compare a company’s financial performance from one year to the next and to
make comparisons among companies. One such ratio is the return on assets, which shows how
efficiently a company is using its assets to produce income. Expressed as a percentage, it equals
net income divided by average total assets.

SELF-TEST
Test your knowledge of the chapter by choosing the best answer for each item below.
1. Which of the following is an example of an exchange of value?
a. Collection from a customer
b. Loss from fire
c. Accumulation of interest
d. Loss from theft
2. Which of the following groups uses accounting information for planning a company’s profitability
and liquidity?
a. Management
b. Investors
c. Creditors
d. Economic planners
3. Economic events that affect the financial position of a business are called
a. separate entities.
b. business transactions.
c. money measures.
d. financial actions.
4. For legal purposes, which of the following forms of business organization is (are) treated as a
separate economic unit from its owner(s)?
a. Sole proprietorship
b. Corporation
c. Partnership
d. All of the above
5. If a company has liabilities of $20,000 and owner’s equity of $37,000, its assets are
a. $38,000.
b. $76,000.
c. $57,000.
d. $19,000.
6. Revenues and withdrawals appear, respectively, on the
a. balance sheet and income statement.
b. income statement and balance sheet.
c. statement of owner’s equity and balance sheet.
d. income statement and statement of owner’s equity.
7. Generally accepted accounting principles
a. define accounting practice at a point in time.
b. are similar in nature to the principles of chemistry or physics.
c. rarely change.
d. are not affected by changes in the ways businesses operate.

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 Chapter 1: Uses of Accounting Information and the Financial Statements 7

8. Independence is an important characteristic of which of the following in performing audits of

financial statements?
a. Governmental accountants
b. Certified management accountants
c. Certified public accountants
d. Accounting educators
9. All of the following are considered basic management functions except
a. Producing goods and services
b. Financing the business
c. Managing employees
d. Electing the board of directors
10. The purchase of land would appear within which section, if any, of the statement of cash flows?
a. Operating activities
b. Investing activities
c. Financing activities
d. It would not appear in the statement of cash flows.

TESTING YOUR KNOWLEDGE

Matching*
Match each term with its definition by writing the appropriate letter in the blank.
1. _____Accounting a. The value of one currency in terms
of another
2. _____Bookkeeping
b. A business owned by stockholders
3. _____Computer
but managed by a board of directors
4. _____Management information system
c. Assets taken from the business by
(MIS)
the owner for personal use
5. _____Management accounting
d. The concept that all business
6. _____Financial accounting transactions should be measured in
7. _____Accounting equation terms of money

8. _____Withdrawals e. The statement that shows the

financial position of a company on a
9. _____Certified public accountant (CPA) certain date
10. _____Sole proprietorship f. The repetitive recordkeeping process
11. _____Partnership g. An economic resource of a business
12. _____Corporation h. An information system that
13. _____Generally accepted accounting measures, processes, and
principles (GAAP) communicates economic information

14. _____Balance sheet i. A business owned and managed by

two or more persons
15. _____Income statement
j. An expert accountant licensed by the
16. _____Statement of owner’s equity state
17. _____Statement of cash flows

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8 Chapter 1: Uses of Accounting Information and the Financial Statements

18. _____Separate entity k. An examination of a company’s

financial statements
19. _____Money measure
l. The statement that shows a
20. _____Asset
company’s profit or loss over a
21. _____Liability certain period
22. _____Owner’s equity m. The statement that discloses the
23. _____Audit operating, investing, and financing
activities during a period
24. _____Sarbanes-Oxley Act
n. The branch of accounting concerned
25. _____Exchange rate with providing external users with
financial information needed to make
decisions
o. An electronic tool that processes
information with great speed
p. The balance sheet section that
represents the owner’s economic
interest in a company
q. The statement that shows the
changes in the owner’s Capital
account during the period
r. An information network that links a
company’s functions
s. Assets = Liabilities + Owner’s
Equity
t. The accounting concept that treats a
business as distinct from its owners,
creditors, and customers
u. The guidelines that define acceptable
accounting practice at a given point
in time
v. A business owned and managed by
one person
w. The branch of accounting concerned
with providing managers with
financial information needed to make
decisions
x. Legislation that regulates financial
reporting and the accounting
profession
y. A debt of a business

*Note to student: The matching quiz might be completed more efficiently by starting with the definition
and searching for the corresponding term.

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 Chapter 1: Uses of Accounting Information and the Financial Statements 9

Short Answer
Use the lines provided to answer each item.
1. On the lines that follow, insert the correct heading for the annual income statement of Tolan
Company on July 31, 20xx.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
2. Briefly distinguish between bookkeeping and accounting.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
3. Briefly define the terms below, all of which relate to the accountant’s Code of Professional
Conduct.
a. Integrity ___________________________________________________________________
__________________________________________________________________________
b. Objectivity ________________________________________________________________
__________________________________________________________________________
c. Independence ______________________________________________________________
__________________________________________________________________________
d. Due care __________________________________________________________________
__________________________________________________________________________
4. What three broad groups use accounting information?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
5. What two objectives must be met for a company to survive?
______________________________________________________________________________
______________________________________________________________________________
6. List the four principal financial statements and briefly state the purpose of each.
Statement
a. __________________________________________________________________________
b. __________________________________________________________________________
c. __________________________________________________________________________
d. __________________________________________________________________________

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10 Chapter 1: Uses of Accounting Information and the Financial Statements

Purpose
a. __________________________________________________________________________
__________________________________________________________________________
b. __________________________________________________________________________
__________________________________________________________________________
c. __________________________________________________________________________
__________________________________________________________________________
d. __________________________________________________________________________
__________________________________________________________________________

True-False
Circle T if the statement is true, F if it is false. Provide explanations for false answers, using the blank
lines below.
1. T F Financial position can best be determined by referring to the balance sheet.
2. T F The IRS is responsible for interpreting and enforcing GAAP.
3. T F One form of the accounting equation is Assets – Liabilities = Owner’s Equity.
4. T F Revenues have the effect of increasing owner’s equity.
5. T F The existence of Accounts Receivable on the balance sheet indicates that the company
has one or more creditors.
6. T F When expenses exceed revenues, a company has suffered a net loss.
7. T F The return on assets is expressed in terms of a dollar amount.
8. T F Withdrawals appear as a deduction on the income statement.
9. T F The current authoritative body dictating accounting practice is the PCAOB.
10. T F A sole proprietor is personally liable for all debts of the business.
11. T F The statement of cash flows would disclose whether or not land was purchased for cash
during the period.
12. T F The statement of owner’s equity links a company’s income statement to its balance
sheet.
13. T F The IASB is responsible for setting guidelines for state and local governments.
14. T F A corporation is managed directly by its stockholders.
15. T F Generally accepted accounting principles are not like laws of math and science; they
are guidelines that define correct accounting practice at a given point in time.
16. T F Net assets equal assets plus liabilities.
17. T F The major sections of a balance sheet are assets, liabilities, owner’s equity, revenues,
and expenses.
18. T F A business transaction must always involve an exchange of money.

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 Chapter 1: Uses of Accounting Information and the Financial Statements 11

19. T F A management information system deals not only with accounting, but with other
activities of a business as well.
20. T F The income statement is generally considered to be the most important financial
statement.
21. T F A business should be understood as an entity that is separate and distinct from its
owners, customers, and creditors.
22. T F Economic planners are accounting information users with a direct financial interest.
23. T F The essence of an asset is that it is expected to benefit future operations.
24. T F Cash flow is a measure of profitability.
25. T F Violation of the Sarbanes-Oxley Act can result in criminal penalties.
26. T F Investments of assets into a business by its owner appear in the statement of cash flows
as an investing activity.
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________

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12 Chapter 1: Uses of Accounting Information and the Financial Statements

___________________________________________________________________________________
___________________________________________________________________________________

Multiple Choice
Circle the letter of the best answer.
1. Which of the following accounts would not appear on the balance sheet?
a. Utilities Expense
b. Charles Mason, Capital
c. Accounts Receivable
d. Wages Payable
2. Companies whose stock is publicly traded must file financial statements with the
a. FASB.
b. GASB.
c. SEC.
d. AICPA.
3. One characteristic of a corporation is
a. unlimited liability of its owners.
b. the ease with which ownership is transferred.
c. ownership by the board of directors.
d. dissolution upon the death of an owner.
4. Which of the following statements does not involve a distinct period of time?
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. Statement of owner’s equity
5. The principal purpose of an audit by a CPA is to
a. express an opinion on the fairness of a company’s financial statements.
b. detect fraud by a company’s employees.
c. prepare the company’s financial statements.
d. assure investors that the company will be profitable in the future.
6. The intentional preparation of fraudulent financial statements can result from all of the following
except
a. fictitious sales or order.
b. the manipulation of inventory records.
c. recording an expense that has been incurred but not yet paid.
d. the misapplication of accounting principles.
7. In a partnership,
a. profits are always divided equally among partners.
b. management consists of the board of directors.
c. no partner is liable for more than a proportion of the company’s debts.
d. dissolution results when any partner leaves the partnership.
8. Which of the following is not a major heading on a balance sheet or income statement?
a. Accounts receivable
b. Owner’s equity
c. Liabilities
d. Revenues

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 Chapter 1: Uses of Accounting Information and the Financial Statements 13

9. Which of the following is not an activity listed on the statement of cash flows?
a. Investing activities
b. Funding activities
c. Operating activities
d. Financing activities
10. Which of the following transactions does not involve an exchange of value?
a. Purchase of land on credit
b. The sale of goods and services
c. The wear and tear on equipment
d. Payment on a loan

APPLYING YOUR KNOWLEDGE

Exercises
1. Pacific Enterprises, a publicly held corporation, always publishes annual financial statements.
This year, however, it has suffered a very large loss, and it therefore would like to limit access to
its financial statements. Why might each of the following insist on seeing Pacific’s financial
statements?
a. Potential investors in Pacific

b. The Securities and Exchange Commission

c. The bank, which is considering a loan request by Pacific

d. Present stockholders of Pacific

e. Pacific’s management

2. Indian Ridge Company had assets of $120,000 and liabilities of $80,000 at the beginning of the
year. During the year assets decreased by $15,000 and owner’s equity increased by $10,000. What
is the amount of liabilities at year end? (Hint: Try using the accounting equation to solve this
one.)
$_______________

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14 Chapter 1: Uses of Accounting Information and the Financial Statements

3. Following are the accounts of Philo’s TV Repair Company as of December 31, 20xx:
Accounts Payable $ 1,300
Accounts Receivable 1,500
Buildings 8,000
Cash ?
P. Farnsworth, Capital 17,500
Equipment 850
Land 1,000
Truck 4,500

Using this information, prepare a balance sheet in good form. (You must derive the dollar amount
for Cash.)

Philo’s TV Repair Company

Balance Sheet
December 31, 20xx
Assets

Liabilities

Owner’s Equity

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 Chapter 1: Uses of Accounting Information and the Financial Statements 15

Crossword Puzzle: Chapter 1

1 2 3 4

6 7

8 9 10

11 12 13

14 15

16

17

18 19

20

21

22

ACROSS DOWN

2 Accounting mainly for external use 1 See 3-Down

5 _____ of professional ethics 3 With 1-Down, income statement measure
8 Economic resources of a company 4 Independent CPA activity
10 One to whom another is indebted 6 Measure of business performance
11 _____ sheet 7 Form of business organization
13 Professional organization of accountants 9 Regulatory agency of publicly held corporations
14 The "A" in FASB 11 Recorder of business transactions
16 IRS's concern 12 Debt of a company
18 Measure of debt-paying ability 15 Impartial
19 Data-generating network 17 Ownership in a company
21 Separate _____ concept 20 Settles an account payable
22 _____ proprietorship

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