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BA 111: Introduction to Accounting > Chapter 1: Accounting Concepts and Procedures > Flashcards

Chapter 1: Accounting Concepts and Procedures Flashcards

1
Q

What is accounting?

A

The recording, analyzing, and interpreting of financial transactions

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2
Q

What are the 4 main types of business organizations?

A

Sole proprietorship, partnership, corporation, and limited liability corporation (LLC)

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3
Q

What is a sole proprietorship?

A

A business owned by one person that is liable for company losses. This business ends with the death of the owner or the closing of the business

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4
Q

What is a partnership?

A

A business owned by at least 2 people that are liable for company losses. This business ends with the death of a partner, the closing of the business, or when a partner leaves

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5
Q

What is a corporation?

A

A business owned by stockholders that requires registering in each state in which it does business. Stockholders’ loss is limited to their investment in the company. A corporation can continue indefinitely

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6
Q

What is a limited liability corporation?

A

A business owned by a limited number of members who are liable only to the extent of their investment in the firm (unlike a corporation, these investors can also run the firm). LLCs must register in each state in which it does business. An LLC ends with the death of a member.

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7
Q

What are the 3 main types of businesses, on the basis of how they earn money?

A

Service company, merchandise company, and manufacturing company

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8
Q

What’s the difference between a merchandise company and a manufacturing company?

A

A manufacturing company produces and sells its own goods, whereas a merchandise company is a manufacturing company or a company that sells the goods of a manufacturing company

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9
Q

What is a creditor?

A

Someone with a claim to a company’s assets through a liability

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10
Q

What is the basic accounting equation?

A

Assets = Liabilities + Equity

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11
Q

What is the difference between supplies and equipment?

A

Equipment (e.g. desks) last longer than supplies (e.g. pens)

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12
Q

What is a balance sheet?

A

A document that provides a snapshot of a firm’s financial transactions in the format of the basic accounting equation

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13
Q

What is a cash basis system?

A

An accounting system in which costs and earnings are only recognized in cash transactions

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14
Q

What is an accrual basis system?

A

An accounting system in which costs and earnings are only recognized in cash and loan transactions

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15
Q

What is accounts receivable?

A

A type of asset in which products are given for a future payment

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16
Q

How are withdrawals accounted for in a balance sheet?

A

They are subtracted from assets and subtracted from equity

17
Q

What is the difference between a withdrawal and an expense?

A

A withdrawal concerns a personal cost and an expense concerns a business cost

18
Q

What is another name for capital?

A

Owner’s equity

19
Q

What is the expanded accounting equation?

A

Assets = Liabilities + Initial Capital - Withdrawals + Revenue - Expenses

20
Q

What is an income statement?

A

An accounting document that summarizes gross and net profits. The accounting period is no longer than a year

21
Q

In what order are balance sheets, statements of equity, and income statements prepared in?

A

(1) Income statement, (2) statement of equity, and (3) balance sheet

22
Q

What is an accounts payable?

A

A type of liability in which products are received and paid for at a later date

23
Q

What is a cash basis system?

A

An accounting system in which costs and earnings are only recognized in cash transactions

24
Q

What is an accrual basis system?

A

An accounting system in which costs and earnings are only recognized in cash and loan transactions

25
Q

What is accounts receivable?

A

A type of asset in which products are given for a future payment

26
Q

How are withdrawals accounted for in a balance sheet?

A

They are subtracted from assets and subtracted from equity

27
Q

What is the difference between a withdrawal and an expense?

A

A withdrawal concerns a personal cost and an expense concerns a business cost

28
Q

What is another name for capital?

A

Owner’s equity

29
Q

What is the expanded accounting equation?

A

Assets = Liabilities + Initial Capital - Withdrawals + Revenue - Expenses

30
Q

What is an income statement?

A

An accounting document that summarizes gross and net profits. The accounting period is no longer than a year

31
Q

In what order are balance sheets, statements of equity, and income statements prepared in?

A

(1) Income statement, (2) statement of equity, and (3) balance sheet

32
Q

What is an accounts payable?

A

A type of liability in which products are received and paid for at a later date

BA 111: Introduction to Accounting (1 decks)

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