Chapter 1 - Financial Statements

Question 1

Sole Proprietorship

Answer 1

A form of business organization that is owned by one person. It is simple to set up and gives you control over the business. It is simple to establish, owner controlled and has tax advantages.

Question 2

Partnership

Answer 2

A business that is owned by two or more persons associated as partners. It is simple to establish, shared control, broader skills & resources, and tax advantages.

Question 3

Corporation

Answer 3

A business organized as a separate legal entity owned by stockholders. It is easier to transfer ownership, easier to raise funds and no personal liability.

Question 4

Internal users

Answer 4

Marketing managers, production supervisors, finance directors, and company officers.

Question 5

External Users

Answer 5

Investors and creditors

Question 6

Types of business activies

Answer 6

Financing, Investing and Operating. The accounting information keeps track of the result of each activity.

Question 7

Liabilities

Answer 7

Amounts owed to creditors

Question 8

Revenue

Answer 8

Increase in assets or decrease in liabilities

Question 9

Auditor

Answer 9

Accounting professional who conducts an independent examination of a company’s financial statements.