Chapter 1 Flashcards
Sole Proprietorship
owned/ controlled by 1 person
Partnership
two or more owners
corporation
group of shareholders that share ownership and pursue common goal
pros and cons of sole
pros
-simple
-lower taxes
-owner control
cons
-personally liable
-hard to transfer ownership
is there more numbers in sole and partners or corporation
more numbers in sole and partner BUT revenue is MUCH greater in corporation
pros and cons of partnership
pros
-simple
-lower taxes
-shared control
-broader resources
cons
-personally liable
-hard to transfer ownership
pros and cons of corporation
pros
-no one person liable
-easy to transfer ownership
-easy to raise funds
-shared through stocks and exchanges
cons
-harder to set up
-higher taxes
Accounting
process of identifying, analyzing, recording, and communicating economic events to interested users
the 3 types of business activity
finance, investing, operating
2 primary sources of outside funds
debt financing (borrowing money) and equity financing (selling shares of stocks)
Assets
resources owned by a business
examples of assets
property, equipment, computers, furniture, investment in security, stocks in other companies
3 types of revenue
sales (sell stuff), service (doctor), interest (banks)
revenue is NOT
STRAIGHT UP CASH
examples of expenses
costs of goods, selling expenses, marketing expenses, income taxes
net income/loss formula
revenue for period- expenses for period
what is the time frame of a shorter life asset
typically a year or less
liabilities
debts or obligations that company owes to others
accounts payable
buying stuff at a later date
interest payable
owing the money to banks
formula for income statement
revenue-expense=net income/loss
formula for retained earnings statement
beginning RE + net income (-net loss) - dividends= End RE
formula for balance sheet
total assets= total liabilities + total stockholders equity= common stock and End RE
creditor
a party that has delivered a product service or loan and is owed money by one or more debtors
dividends
the portion of net income distributed to owners
they also decrease RE
2 categories for claims to assets
claims of creditors (liabilities) and claims of creditors (stockholders equity)
what is the order for the balance sheet
assets, liabilities, stockholders equity
