Challenge 2 Task 3

Now that you have completed the financial statements for HHEC, the sole proprietorship, and HHEC the corporation, Francesca and Sophia tell you that they want to better understand what, specifically, you have done for their company up to this point. You explain this to them. Write a memo to the sisters in which you explain the following items and concepts:

1) What financial statements are, what their purpose is, and what information they convey

2) The difference between the cash basis of accounting and the accrual basis of accounting

3) The advantages and disadvantages of each form of business organization

4) The closing process, including the difference between temporary and permanent accounts