Chapter 1 Flashcards
What does GAAP stand for?
Generally Accepted Accounting Principals
Are personal and business kept together or separate?
Separate
What are the elements that make up a balance sheet?
Assets (on left side)
Liabilities and owners equity (capital) (on right side)
What is sole proprietorship?
A business that has one owner
What is a partnership?
A form of business ownership that has at least 2 owners (partners)
What is a corporation?
A business owned by shareholders
What is an advantage of sole proprietorship?
The owner makes all the decisions for the business
What is a disadvantage of sole proprietorship?
If the business cannot pay it’s obligations (liabilities), the owner must pay them
What is an advantage of a partnership?
The partners can share decision-making and the risks of the business
What is an advantage of a corporation?
The shareholders are not personally liable for the corporation’s debts
What is a disadvantage of a partnership?
The partners’ personal assets could be lost if the partnership cannot meet its obligations
What is a disadvantage of a corporation?
Usually do not have input into the business decisions
What are the responsibilities of bookkeepers?
General accounting work
Perform some summarizing and analyzing of accounting information
Supervise accounting clerks
List the functions of accounting
Analyzing: what happened & how business is affected
Recording: putting info in the accounting system
Classifying: grouping same activities together
Summarizing: creating totals by category and/or date
Reporting: issuing reports that tell the results of the previous functions
Interpreting: examining the reports to determine how the pieces of info relate
What does IFRS stand for?
International financial reporting standards
What’s the difference between bookkeeping and accounting?
BK: recording function of the accounting process (enters accounting info in the company’s books)
ACC: takes that info & prepares financial reports used to analyze the company’s financial position
What does “on account” mean?
Buy now, pay later
Accounts payable/liability
What are the various types of accountants in Canada?
Public accountants
Private (managerial) accountants
Non-profit (governmental) accountants
What is the purpose of the accounting equation
To provide a basis for understanding the accounting system of a business
Define capital
Another term for the owners current investment, or equity, in the business’ assets
What is the purpose of a balance sheet?
It is a formal report that presents the info from the ENDING BALANCES of both sides of the accounting equation
When does a company earn revenue?
When they give the client their bill
What 2 assets do revenue go to?
Accounts receivable and cash
Define expenses
The costs the company incurs in carrying on operations in its efforts to create revenue
