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Accounting 201A > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

What is a sole proprietorship?

A

A business owned by one person

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2
Q

What are the advantages of a sole proprietorship?

A
  • Simple to set up
  • Gives you control
  • Tax advantages
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3
Q

What is a partnership?

A

A business owned by two or more people.

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4
Q

What are the advantages of a partnership?

A
  • easier initial start up due to money
  • having two people would bring different skills
  • Tax advantages
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5
Q

What is a corporation?

A

A business organized as a separate legal entity owned by stockholders

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6
Q

What are the advantages of a corporation?

A
  • simple to transfer ownership
  • Easier to raise funds
  • no liability
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7
Q

What is accounting?

A

The information system that identifies, records, and communicates the economic events of an organization to interested users?

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8
Q

What two groups can users of accounting information be divided into?

A

Internal and external users

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9
Q

What are internal users?

A

Managers, production supervisors, finance directors, and company officers

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10
Q

What does accounting provide for internal users?

A

Internal reports, such as financial comparisons of operating alternatives, projected income, forecasts of cash needs, financial statements

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11
Q

What are external users?

A

Investors (owners) and Creditors

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12
Q

What does the Sarbanes-Oxley Act do?

A
  • Management must certify the accuracy of financial info

- Much higher penalties

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13
Q

What are the 3 types of business activities?

A

Financing, investing, and operating

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14
Q

What is financing?

A

This is when a person uses personal savings or a loan

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15
Q

What is investing?

A

This is when money is used to purchase equipment to run the business

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16
Q

What is operating?

A

Activities of making and selling a product

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17
Q

What is the accounting information system?

A

This keeps track of the results of each of the various business activities

18
Q

What are creditors?

A

Persons or entities that a company owes money to

19
Q

What are liabilities?

A

The amount owed to creditors

20
Q

What is a note payable?

A

Money owed to a bank

21
Q

What are Bonds Payable?

A

debt securities sold to investors that must be repaid at a particular date

22
Q

What is common stock?

A

Term used to describe the total amount paid in by stockholders for the shares they purchased

23
Q

What are dividends?

A

Cash payments to stockholders

24
Q

What are assets?

A

Resources owned by a business

25
Q

What is revenue?

A

The increase in assets or decrease in liabilities resulting from the sale of goods

26
Q

What are accounts receivable?

A

The right to receive money from a customer at a later time

27
Q

What are expenses?

A

Costs inquired when purchasing items when generating revenue

28
Q

When does net income happen?

A

When revenue exceeds expenses

29
Q

When does net loss happen?

A

When expenses exceed revenue

30
Q

What are the four types of financial statements?

A
  • Income statement
  • Retained earnings
  • Balance sheet
  • Statement of cash flows
31
Q

What is an income statement?

A

This is used to show how successfully a business performed during a period of time

32
Q

What is a retained earnings statement?

A

This is used to indicate how much of previous income was distributed to you and other owners in the form of dividends

33
Q

What is a balance sheet?

A

This is used to present a picture at a point of time of what your business owns and owes

34
Q

What is a statement of cash flows?

A

Used to show where your business obtained cash during a period and how that cash was used

35
Q

What are retained earnings?

A

The net income retained in the corporation

36
Q

What is stockholder’s equity?

A

The owners claim to assets. Consists of retained earnings and common stock

37
Q

What is the basic accounting equation?

A

Assets = Liabilities + Stockholders Equity

38
Q

What are the notes to the financial statements?

A

These clarify the financial statements and provide additional detail

39
Q

What is an auditor’s report?

A

It states the auditor’s opinion as to the fairness

40
Q

What is the formula for Ending Stock Holder’s Equity?

A

Beginning SE + Revenue - Expense (Net Income) - Dividends

Accounting 201A (12 decks)

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