Ch 1 - Acct, Lang of Business GEN 1

Question 1

What three things is an accounting system designed to do?

Answer 1

1. accumulate data about a firm’s financial affairs
2. classify the data in a meaningful way
3. summarize it in financial statements

Question 2

What are the three main responsibilities of an accountant?

Answer 2

1. establishes records and procedures that make up an accounting system
2. supervises ops of system
3. interprets resulting financial info

Question 3

What are the three main areas of practice for accountants?

Answer 3

1. public accounting
2. managerial accounting
3. governmental accounting

Question 4

What are the three main services of a public accounting firm?

Answer 4

1. auditing
2. tax accounting
3. mgmt advisory services

Question 5

What are the five requirements of becoming a CPA?

Answer 5

1. certain number of college credits in accounting courses
2. demonstrate good personal character
3. pass Uniform CPA Examination
4. fulfill experience requirements of state of practice
5. follow professional code of ethics

Question 6

What is the difference between tax compliance and tax planning? (2)

Answer 6

1. compliance: deals with prep of tax returns and audit of those returns
2. planning: involves giving advice on how to reduce tax liability

Question 7

What are eight main activities of managerial accounting?

Answer 7

1. establishing accounting practices
2. managing accounting systems
3. preparing financial statements
4. interpreting financial info
5. providing financial advice to mgmt
6. preparing tax forms
7. performing tax planning services
8. preparing internal reports for mgmt

Question 8

What are the four agencies employing large number of accountants?

Answer 8

1. SEC
2. IRS
3. FBI
4. Homeland Sec

Question 9

Who are the three categories of users of financial info inside the company?

Answer 9

1. owners
2. managers
3. employees

Question 10

Who are the seven categories of users of financial info outside the company?

Answer 10

1. tax authorities
2. suppliers
3. regulatory agencies
4. unions
5. banks
6. customers
7. investors/potential investors

Question 11

What are the three main types of business entities? (5)

Answer 11

1. sole proprietorship
2. corporation (S Corp)
3. partnership (and LLP)

Question 12

when does a sole proprietorship end?

Answer 12

When owner is no longer willing or able to keep the business going

Question 13

Is the owner legally responsible for any debts or taxes of the business?

Answer 13

Yes

Question 14

Which is the only form of business that is legally considered a separate legal entity from it’s owner(s)?

Answer 14

corporation

Question 15

What are the six areas that should be addressed in a partnership agreement?

Answer 15

1. amount each partner will contribute to the business
2. each partner’s percentage of ownership
3. each partner’s share of the profits
4. duties each partner will perform
5. responsibility each partner has for amounts owed to creditors and tax authorities
6. how to divide up ownership and profits

Question 16

What happens in a partnership when a partner leaves?

Answer 16

the partnership is dissolved and new one is drawn up with remaining partners

Question 17

Who is responsible for unpaid debts or taxes in a partnership?

Answer 17

any of the partners personal finances

Question 18

What liability is the limited liability partnership?

Answer 18

each partner is responsible for their own actions and those they supervise, but they are not responsible for another partner’s malfeasance

Question 19

What is an advantage to an S Corp?

Answer 19

owners have limited liability and avoid double taxation.