1. Nature of accounting Flashcards

1
Q

-Single owner
-Not a legal entity
-Unlimited liability
-Easy to form
-Limited life (while owner is alive)
-Taxation = personal income

A

Sole proprietorship

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2
Q

-2 or more owners
-Not a legal entity
-Unlimited liability
-Easy to form
-Limited life (all owners are living)
-“Pass through taxation”

A

Partnership

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3
Q

-Separate legal entity
-Limited liability
-More difficult to form
-Double taxation (business and owner’s money)
-C-corp, S-corp
-1 or more owners
-Public vs private
-Unlimited life (stock transfer)

A

Corporation

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4
Q

Usual business operations of a company
-Ex. Selling products, providing services

A

Operating activities

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5
Q

Purchasing and/ or the sale of resources
-Ex. Depending on business’s day to day. Could be buying buildings, cars, ect.

A

Investing activities

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6
Q

Having to do with debt (loan) or equity (raise money by selling stock)

A

Financial activities

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7
Q

Measure and communicate financial info by:
-analyzing
-recording
-classification
-summarization
-reporting
-interpretation of financial statements

A

Accounting

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8
Q

Recording financial info in a prescribed manner

A

Bookkeeping

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9
Q

What is comparison in accounting?

A

Being able to compare different companies because of a standard format

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10
Q

Type of accounting that produces financial statements.
-Internal and external use

A

Financial accounting

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11
Q

Type of accounting that prepares records/ reports for tax filing

A

Tax accounting

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12
Q

Type of accounting that deals with internal reports and decisions regarding operations

A

Managerial accounting

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13
Q

What is the GAAP and who makes it?

A

Generally accepted accounting principles. Creates by the Financial accounting standards board (FASB), Emerging issues task force (EITF), AICPA, SEC, AAA.
-Internationally created by IASB and IFRS

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14
Q

Property of monetary value owned by a business
-Probably future economic benefit
-“Make the business money”

A

Assets

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15
Q

Any debt a business owes
-Probable future sacrifices of economic benefit
-“Costs the business money”

A

Liabilities

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16
Q

Amount by which total assets exceed the total liabilities of business
-What’s left of assets after all the liabilities are satisfied
-An owner’s financial interest in a business

A

Owner’s equity

17
Q

An inflow of assets as a result of selling product or providing a service
-Gain: peripheral transaction/ secondary operation

A

Revenue

18
Q

Decrease in assets (other than withdraws) as a result of efforts to produce revenues
-Loss from peripheral transaction

A

Expenses

19
Q

Time measurement (usually one year) that accounts are tracked. Calendar and fiscal years

A

Accounting period

20
Q

All expenses incurred to generate revenues should be recognized during the same period as those revenues

A

The matching principle