Chapter 1 Flashcards
Sole Proprietorship
- Simple to establish
- Owner controlled
- Tax Advantages
Partnership
- Simple to establish
- Shared control
- Broader skills and resources
- Tax Advantages
Corporation
- Easier to transfer ownership
- Easier to raise funds
- No personal Liability
Who are the external users
Creditors
Investors
How will the study of accounting help you?
A working knowledge of accounting is desirable for virtually every field of business. Some examples of how accounting is used in business careers include the following:
- General management - Marketing
The ______ _____ ____ keeps track of the results of each of these business activities.
accounting information system.
Two primary sources of outside funds are
- Borrowing money
2. Issuing (selling) shares of stock for cash
Borrowing money
- Amounts owed are called ______.
Liabilities
Borrowing money
- Party to whom amounts are owed are _______.
Creditors.
Borrowing money
- ______ _____ and _____ _____ are different types of liabilities.
Notes payable and bonds payable.
Issuing
(selling) shares of stock for cash
_____ _____ is the term used to describe the amount paid by stockholders for shares they purchase
Common stock
Payments to stockholders are called _____.
dividends.
Purchase of resources a company needs to operate
Computers, delivery trucks, furniture, buildings.
Resources owned by a business are called _____.
assets
______ are another example of an investing activity.
Investments.
Once a business has the assets it needs, it can begin its ______.
operations
Amounts earned from the sale of products and other sources
Revenues
Types of revenues
Sales revenue, service revenue, and interest revenue.
Inventory
goods available for sale to customers.
Accounts receivables
Right to receive money from a customer as the result of a sale.
_____ - Cost of assets consumed or services used. (Cost of goods sold, selling, marketing, administrative, intereset, and income taxes expense).
Expenses
Liabilities arising from expenses include what?
accounts payable, interest payable, wages payable, sales taxes
payable, and income taxes payable.
____ ____ - when revenues exceed expenses.
Net income
_____ ____ - when expenses exceed revenues.
Net loss.
Reports revenues and expenses for a specific _______,
period of time
Past net income provides information for _______.
predicting future net income.
Net income is needed to determine the ____ in ____.
ending balance and retained earnings.
Statements shows amounts and ______ in retained earnings during the period
Causes of changes
______ as that covered by the income statemente.
Time period is the same
Users can ______ payment practices.
evaluate dividend.
Ending balance in ____ is needed in preparing the _____.
retained earnings; balance sheet
Reports assets and claims to assets at a specific _______.
point in time.
Assets = _____ + ______.
Liabilities + Stockholders’ Equity.
Lists ____, followed by liabilities and stockholders’ equity.
assets first.
Assets
Resources that should provide a future
economic benefit
Liabilities
Resources (money, services or assets) OWED to others.
Shareholders Equity
The amount of resources available to
shareholders after all assets have
been used to pay off all liabilities
U.S. companies that are publicly traded must provide
shareholders with an _______.
annual report.
The annual report always includes:
Financial statements Income, Retained Earnings, Balance Sheet, Cash Flows Notes to the Financial Statements: Management discussion and analysis. Notes to the financial statements. Auditor's report.
______ - opinion as to the fairness of the presentation
of the financial position and results of operations and
their conformance with generally accepted accounting
principles.
Auditor’s
Only certified public accountants (CPA) may perform
____.
audits
Only _______ may perform
audits.
certified public accountants (CPA)
