accounting

Question 1

managerial accounting

Answer 1

accounting info provided for internal users

Question 2

financial accounting

Answer 2

accounting info provided for external users

Question 3

investors

Answer 3

buy and sell stock eg mom and dad in your company

Question 4

creditors

Answer 4

lend money for company eg bank

Question 5

corporation

Answer 5

company that is legally seperate from owners

Question 6

limited liabiltiy

Answer 6

prevents stockholders from being held personally responsible for the financial obligations of the corporation

Question 7

sole proprietorship

Answer 7

• business owned by one person
• person is held legally responsible for the activites of the business
• owners must have sufficient personal funds to finance the business and the ability to borrow money
• taxed at owner’s personal income tax rate (usually lower than the corporate income tax rate)

Question 8

partnership

Answer 8

business owned by two or more persons

• person is held legally responsible for the activites of the business
• owners must have sufficient personal funds to finance the business and the ability to borrow money
• taxed at owner’s personal income tax rate (usually lower than the corporate income tax rate)

Question 9

is a corporation taxed twice?

Answer 9

yes- first when the company earns it and pays corporate income taxes on it and then again when stockholders pay personal income taxes on amounts the firm distributes to them as dividends

Question 10

financing activities

Answer 10

include transactions the company has with investors and creditors such as issueng stock and borrowing money eg from a local bank

Question 11

investing acitivites

Answer 11

include transactions involving the purchase and sale of resources that are expected to benefit the company for several years, eg such as the purchase of equipment for 24,000.

Question 12

operating acitivites

Answer 12

include transactions that relate to the primary operations of the company such as eg providing products and services to customers and the associated costs of doing so, like utilities taxes advertising salaries rent and utilities.

Question 13

what do investors and creditors ultimately want to know?

Answer 13

the company’s resources and their claims to those resources

Question 14

assets

Answer 14

the resources of a company

Question 15

liabilities

Answer 15

amounts owed to creditors

Question 16

stockholder’s equity

Answer 16

owners’ claims to tresources, eg stockholders claims to resources

Question 17

accounting equation

Answer 17

relationship between assets liabitilites and stockholders equity

assets= liabilities + stockholders’ equity

in other words

resourses = creditors claims + owners claims

(creditors claims + owners claims = claims to resources)

Question 18

what does the accounting equation illustrate

Answer 18

that the value of a company equals total resources of the company minus amounts owed to creditors. creditors expect to receive only resources equal to the amount owed them. stockholders on the other hand, can claim all resources in excess of the amount owed to creditors

Question 19

what do stockholders claim

Answer 19

all resources in excess of amounts owed to creditors, thus profits of the company are claimed solely by stockholders

Question 20

how to we calculate a company’s profits?

Answer 20

by comparing its revenues and expenses

Question 21

revenues

Answer 21

amounts earned from selling prodcut or services to customers

Question 22

expenses

Answer 22

cost of providing products and services

Question 23

net income

Answer 23

the difference between revenues and expenses

also called earnings and profit.

Question 24

net loss

Answer 24

when expenses exceed revenues

Question 25

net

Answer 25

means the difference between two amounts. short of ‘net of’ which means minus.

Question 26

dividends

Answer 26

cash payments to stockholders