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Accounting For Private Vs. Public Companies

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Accounting
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Strayer University
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Running Head: ACCOUNTING FOR PRIVATE VS. PUBLIC COMPANIES 1
Accounting for Private vs. Public Companies
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ACCOUNTING FOR PRIVATE VS. PUBLIC COMPANIES 2
Investment strategies of primary users
The differentials factors for private companies have significant implications for the
company's financial reports. The private company's financial statement users do not easily access
the public markets, making it hard for them to exit their different investments in the company
before the lapse of their defined terms (FASB, n.d.). This makes it challenging for the private
company investors and the lenders to realize any significant changes in the value of their claims
on the company they run. This differential factor is interesting because it provides an in-depth
explanation as to why users of private company financial statements most focus on the cash that
they are able to gain from their investments. This cash includes the dividends that they receive
from their total shares, the interest they earn from their total investment, repayment on their
principal, and other sources of income that the investors receive from the private company.
Ownership and Capital Structure
One of the differences experienced by private and public companies is in the capital
funding and capital structure of the two. This difference is mostly attributed to the intense focus
that private companies have on the different ways of getting income. This includes income from
estate taxes, succession planning, income tax, and other sources of income for private companies
(FASB, n.d.). The Ownership and Capital Structure is more interesting as it explains how private
company owners are taxed on the company's earnings. This is why most private companies are
not subjected to income tax since the owners are taxed individually on their companies' total
income. This is an area of interest to many individuals who fail to understand how taxation
works for private companies and their owners.

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Running Head: ACCOUNTING FOR PRIVATE VS. PUBLIC COMPANIES Accounting for Private vs. Public Companies Supervisor Date: 1 ACCOUNTING FOR PRIVATE VS. PUBLIC COMPANIES 2 Investment strategies of primary users The differentials factors for private companies have significant implications for the company's financial reports. The private company's financial statement users do not easily access the public markets, making it hard for them to exit their different investments in the company before the lapse of their defined terms (FASB, n.d.). This makes it challenging for the private company investors and the lenders to realize any significant changes in the value of their claims on the company they run. This differential factor is interesting because it provides an in-depth explanation as to why users of private company financial statements most focus on the cash that they are able to gain from their investments. This cash includes the dividends that they receive from their total shares, the interest they earn from their total investment, repayment on their principal, and other sources of income that the investors receive from the private company. Ownership and Capital Structure One of the differences experienced by private and public companies is in the capital funding and capital structure of the two. This difference is mostly attributed to the intense focus that private companies have on the different ways of getting income. This includes income from estate taxes, succession ...
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