chapter 2 businesses

Question 1

business entity concept

Answer 1

activities of a business are recorded separately from the activities of its owners, creditors, or other businesses.

Question 2

Propriety

Answer 2

owned by 1 individual
- they are easy and cheap to organize (small businesses)

Question 3

Partnership

Answer 3

owned by 2 or more individuals
- combines the skills and resources of more than one person.

Question 4

Corporation

Answer 4

organized under state OR federal statues as a separate, legal, taxable entity.
- ownership is divided into shares called stock.

Question 5

Limited liability company

Answer 5

combines attributes of partnership and corporation
- has tax and legal liability advantages for owners

Question 6

cost concept

Answer 6

amounts are initially recorded in the accounting records at their cost or purchase price.

Question 7

objectivity concept

Answer 7

requires that the amount recorded in the accounting records be based on objective EVIDENCE .

Question 8

Unit of measure concept

Answer 8

requires that economic data be recorded in dollars.

Question 9

assets

Answer 9

the resources owned by a business

Question 10

liabilities

Answer 10

the rights of creditors are the debts of the business

Question 11

Owners equity

Answer 11

the rights of the owners

Question 12

the accounting equation

Answer 12

assets= liabilities + owner’s equity

Question 13

business transaction

Answer 13

an economic event or condition that directly changes an entity’s financial condition or its results of operations.

Question 14

transactions

Event

Answer 14

economic event and condition

natural occurrence