Accountancy Concepts Flashcards
The modern method of accounting is based on the system created by
an Italian monk __________________
Fra Luca Pacioli.
In the past, many businesses maintained their records manually in
books – hence the term ___________ came about. This method of
keeping manual records was cumbersome, slow, and prone to human
errors of translation.
“bookkeeping”
A faster, more organized, and easier method of maintaining books is
using ___________________________
Computerized Accounting Programs.
is the system a company uses to measure its financial
performance by noting and classifying all the transactions like sales,
purchases, assets, and liabilities in a manner that adheres to certain
accepted standard formats. It helps to evaluate a Company’s past
performance, present condition, and future prospects.
Accounting
the art of recording,
classifying, and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least, of a
financial character and interpreting the results thereof.
Accounting
We have said that accounting consists of these functions:
- Recording
- Classifying
- Summarizing
- Reporting and evaluating the financial activities of a business
Evidence of the transaction is
called a ___________
Document
Recording is first
carried out in a book of original entry called the _______.
journal.
a record, listing transactions in a chronological order.
Journal
The principal modules commonly used are:
- General Ledger
- Inventory
- Order Entry
- Accounts Receivable
- Accounts Payable
- Bank Manager
- Payroll
In general, business entity or organizations are:
- Sole proprietorship
- Partnerships
- Corporations
is a business wholly owned by a single
individual. It is the easiest and the least expensive way to start a
business and is often associated with small storekeepers, service
shops, and professional people such as doctors, lawyers, or
accountants.
sole proprietorship
is the most common form of
business organization and is relatively free from legal complexities.
sole proprietorship
One major advantage of sole proprietorship is few liability
since the owner and the business are regarded as the same, from a
legal standpoint. True or False>
False, it has unlimited liability
is a legal association of two or more individuals called
partners and who are co-owners of a business for profit. Like
proprietorships, they are easy to form.
Partnerships
This type of business
organization is based upon a written agreement that details the
various interests and right of the partners and it is advisable to get
legal advice and document each person’s rights and responsibilities.
Partnerships
There are three main kinds of partnerships
- General partnership
- Limited partnership
- Master limited partnership
A business that is owned and operated by 2 or more persons where
each individual has a right as a co-owner and is liable for the
business’s debts.
General Partnership
A partnership must secure a Federal Employee Identification
number from the Internal Revenue Service (IRS) using special
forms.
General Partnership
Each partner in General Partnership reports his share of partnership profits or losses on his
individual tax return and pays the tax on those profits. The
partnership itself does not pay any taxes on its tax return. True or False?
True
One or more partners run the business as
General Partners and the remaining partners are passive investors
who become limited partners and are personally liable only for the
amount of their investments.
Limited partnership
They are called limited partners
because they cannot be sued for more money than they have invested
in the business. True or False?
True
are commonly used for real-estate
syndication.
Limited Partnership
are similar to Corporations trading
partnership units on listed stock exchanges. They have many
advantages that are similar to Corporations e.g. Limited liability,
unlimited life, and transferable ownership. In addition, they have the
added advantage if 90% of their income is from passive sources (e.g.
rental income), then they pay no corporate taxes since the profits are
paid to the stockholders who are taxed at individual rates.
Master Limited Partnership
is the most dominant form of business
organization in our society.
Corporation
is a legally chartered
enterprise with most legal rights of a person including the right to
conduct business, own, sell and transfer property, make contracts,
borrow money, sue and be sued, and pay taxes.
Corporation
The modern Corporation evolved in the beginning of this century
when large sums of money were required to build railroads and steel
mills and the like and no one individual or partnership could hope to
raise. True or False?
True
The strength of a Corporation
its ownership and management
are separate.
Some of the disadvantages of Corporations are that incorporated
businesses suffer from higher taxes than unincorporated businesses.
In addition, shareholders must pay income tax on their share of the
Company’s profit that they receive as dividends. This means that
corporate profits are taxed twice. True or False?
True
