Accounting Chapter 1 flash cards

Question 1

Sole Propietership

Answer 1

• it is simple to set up
• gives you control over the business
• examples are barbershops, law offices
• combined skills and tax advantages

Question 2

partnership

Answer 2

*more than one owner
*shared control
combined skills
*usual tax advantage unlimited liability

Question 3

corporation

Answer 3

• one to many stockholders (shareholders) who elect board of directors who hires
• management; easy ownership and fundraising;limited liability

Question 4

Internal User

Answer 4

management of employees

Question 5

External User

Answer 5

investors, creditors, governments, customers, regulators, labor unions

Question 6

Ethics

Answer 6

• cases, Sarbanes -Oxley Act
• management must certify accuracy of financial information
• independence of auditors increased
• penalties of fraudulent activities increased

Question 7

Financing

Answer 7

borrowing form of repayment to creditors; issuing stock; paying dividends

Question 8

Investing

Answer 8

Purchasing (and selling) loved lived assets; (e.g. pp&e; investing idle cash

Question 9

Operating

Answer 9

generating revenues,incurring, expenses.

Question 10

Income statement (period)

Answer 10

Revenues and expenses (difference is net income or loss)

Question 11

Retained Earnings Statement (period)

Answer 11

changes in earnings retained in business

Question 12

Balance Sheet (end of period/point in time)

Answer 12

assets, liabilities, owners equity [equation!!]

Question 13

Cash Flow Statement (period)

Answer 13

cash provided/used by operating, investing, financing activities.

Question 14

Inter-relationships

Answer 14

net-income, ending retained earnings, ending cash on two statements)

Question 15

Annual Reports

Answer 15

four statements plus management discussion and analysis; notes; audit report.

Question 16

Basic Accounting equation

Answer 16

Assets=Liabilities + stockholders equity