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ACCT 2000 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

What are the 3 forms of business organization?

A
  • Sole proprietorship
  • Partnership
  • Corporation
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2
Q

A sole proprietorship has __ owner

A

1

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3
Q

A partnership has __________ owners

A

2 or more

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4
Q

A corporation has _____ owners due to the issuance of stock

A

Many

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5
Q

What are the three advantages of a sole proprietorship?

A
  1. Simple to establish
  2. Control
  3. Tax advantages (only have to pay taxes once)
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6
Q

What is a disadvantage of a sole proprietorship?

A

Personal liability (opens self up to being sued)

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7
Q

What are the three advantages of a partnership?

A
  1. Simple to establish
  2. Broader skills and resources
  3. Tax advantages
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8
Q

What is a disadvantage of a partnership?

A

Personal liability

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9
Q

What are three advantages of a corporation?

A
  1. Easy to transfer ownership
  2. Easy to raise capital (sell stock)
  3. No personal liability (most you can lose is stock investment)
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10
Q

What is a disadvantage of a corporation?

A

Taxes (paid twice; once by the company and once when dividends are paid)

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11
Q

Accounting is the information system that _________, __________, and ____________ the economic events of an organization to interested users.

A

Identifies, records, and communicates

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12
Q

A type of user that uses accounting to plan, organize, or run a business
examples: managers, supervisors, company officials

A

Internal user

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13
Q

A type of user that uses accounting to make decisions on whether to buy or sell stock or loan a company money
examples: investors, creditors, regulators

A

External user

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14
Q

An act passed by Congress that deals with ethical behavior of accounting

A

Sarbanes-Oxley Act (Sox Act)

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15
Q

What are the three types of business activities?

A
  • Financing
  • Investing
  • Operating
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16
Q

Raising money is a type of __________ activity

A

Financing

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17
Q

Purchasing resources needed to operate a business is a type of _____________ activity

A

Investing

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18
Q

Day to day operations of a company is a type of _________ activity

A

Operating

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19
Q

Borrowing money from creditors and issuing shares of stock are examples of _____________ activities

A

Financing

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20
Q

Purchasing resources to be used in the business such as computers, equipment, delivery trucks, are examples of _______________ activities

A

Investing

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21
Q

A shoe store selling shoes, a dentist cleaning teeth, and a lawn care company mowing lawns are all examples of _________ activities

A

Operating

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22
Q

What type of statement reports revenue an expenses for a period of time?

A

Income statement

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23
Q

Net income = ___________ - ___________

A

Revenue - Expenses

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24
Q

What type of statement that reports changes in the net income retained in the business?

A

Retained earnings statement

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25
Q

Retained Earnings = ___________ - _________- ___________

A

Revenues - Expenses - Dividends (Net income - Dividends)

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26
Q

Ending Retained Earnings = ________ + ___________ - ___________

A

Beginning retained earnings + net income - dividends

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27
Q

What type of statement reports assets, liabilities, equity, and claims to assets at a specific point in time?

A

Balance sheet

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28
Q

Assets = _______ + ___________

A

Liabilities + stockholders equity

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29
Q

What type of statement shows sources and uses of cash flows?

A

Statement of cash flows

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30
Q

What are the three sections of a statement of cash flows?

A
  • Financing
  • Investing
  • Operating
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31
Q

What is the only type of statement that DOES NOT cover a period of time, but rather, a day?

A

Balance sheet

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32
Q

If it is the start of a business, the beginning retained earnings is ________

A

Zero

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33
Q

Liabilities are also known as the ________ __ __________

A

Claims of creditors

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34
Q

Resources owned by a business are known as _______

examples: cash, accounts receivable, inventory, supplies, property, plant, and equipment

A

Assets

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35
Q

Amounts owed to creditors/suppliers are known as _________

examples: accounts payable, notes payable, bonds payable

A

Liabilities

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36
Q

Owner’s claims to assets are known as _____________

examples: common stock, retained earnings

A

Stockholder’s equity

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37
Q

Net income retained in the business is known as ___________

A

Retained earnings

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38
Q

Cash payments to stockholders are known as ___________

A

Dividends

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39
Q

Amounts earned from the sale of products or services performed are known as _______________
examples: service revenue

A

Revenues

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40
Q

Cost of assets consumed or services used is __________

examples: rent expense, utilities expense, interest expense, cost of goods sold

A

Expenses

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41
Q

When Revenues >(bigger than) Expenses, this results in a __________

A

Net income

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42
Q

When Expenses >(greater than) Revenues, this results in a ______

A

Net loss

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43
Q

How many parts does the annual report have?

A

4

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44
Q

What are the 4 parts of the annual report?

A
  • Auditor’s report
  • Management, Discussion, and Analysis
  • Financial Statements
  • Notes to Financial Statements
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45
Q

Revenues and Expenses always go on the __________ ___________

A

Income statement

46
Q

Assets and Liabilities go on the ________ _________

A

Balance Sheet

47
Q

Cost of goods sold is an __________

A

Expense

48
Q

Any thing “payable” is a ______

A

Liability

49
Q

Unearned service revenue is a ______

A

Liability

50
Q

In a balance sheet, assets must _______ liabilities

A

Equal

51
Q

What is the term for the time it takes a company to go from cash and then back to cash through the processes of financing, investing, and operating?

A

Operating Cycle

52
Q

How are current assets listed in a balance sheet?

A

In the order of liquidity

53
Q

____________ is how easy it is to convert something in to cash

A

Liquidity

54
Q

What is the term for things that have value to the owner, but are untouchable, and are listed on the balance sheet under assets?

A

Intangible assets

55
Q

Stocks and bonds are examples of ____________________

A

Long-term investments

56
Q

Another term for accumulated depreciation is _____ _________

A

Contra Asset

57
Q

What is another term for liabilities?

A

Claims of creditors

58
Q

What is another term for stockholder’s equity?

A

Claims of owners

59
Q

Assets that a company expects to convert to cash / use up in a year or less are _____________

A

Current assets

60
Q

Investments that are held for more than a year are considered _____________________

A

Long term investments

61
Q

Liabilities that are expected to be paid in a year or less are _________________

A

Current liabilities

62
Q

Amounts received from issuing or selling stock is known as ________________

A

Common Stock

63
Q

What are the three types of ratios used in accounting? very important to know

A
  • Profitability
  • Liquidity
  • Solvency
64
Q

What type of ration measures the INCOME or operating success of a company for a given time?

A

Profitability

65
Q

What type of ration measures the SHORT-TERM ability of a company to pay its obligations?

A

Liquidity

66
Q

What type of ratio measures the ability of the company to survive over a LONG PERIOD OF TIME?

A

Solvency

67
Q

EPS (Earnings per share) is an example of what type of ratio?

A

Profitability

68
Q

Working capital and current ratio are examples are what type of ratio?

A

Liquidity

69
Q

Debt to total assets is what type of ratio?

A

Solvency

70
Q

For the profitability and liquidity ratios, _____________ (higher or lower) is better

A

Higher

71
Q

For the solvency ratio, _____________ (higher or lower) is better

A

Lower

72
Q

Working capital = _________ - __________

A

Current assets - current liabilities

73
Q

Current ratio = __________ / _________

A

Current assets / liabilities

74
Q

Debt to total assets = _______ / ________

A

Total liabilities / total assets

75
Q

What is the primary accounting standard setting body in the US? (makes the rules)

A

Financial Accounting Standards Board (FASB)

76
Q

What issues standard (rules) called IFRS for countries overseas? (world-wide accounting, not just in US)

A

International Accounting Standards Board (IASB)

77
Q

__________ is the set of rules used for accounting

A

Generally Accepted Accounting Principles (GAAP)

78
Q

The 2 fundamental qualities for useful accounting information is …

A
  • Relevant

- Faithful representation

79
Q

Relevant information must have what 2 values?

A
  • Predictive value

- Confirming value

80
Q

Faithful representation must have be _________ , __________ , and _________

A
  • Complete
  • Neutral
  • Free from error
81
Q

If one company uses the same accounting principles from year to year, then this is an example of ___________

A

Consistency

82
Q

If the information that is obtained through accounting can be proved and is free from error then it is _________

A

Verifiable

83
Q

If different companies use the same accounting principles then this is an example of _________

A

Comparability

84
Q

If the information obtained through accounting is available to decision makers before it loses the capacity to influence them, it is considered to have ___________

A

Timeliness

85
Q

If the information obtained through accounting is clear and concise, it has _____________

A

Understandability

86
Q

The _______ ________ principle states that assets / liabilities that are actively traded (e.g. investments) have to be recorded at their fair value

A

Fair Value

87
Q

The ________ ________ principles records assets at what it costs to acquire, not the current value of it

A

Historical Cost

88
Q

The ________ _________ principle states that companies must disclose all events that would make a difference in a decision

A

Full Disclosure

89
Q

Transactions are financial events that require recording in the _________ _________

A

Financial statements

90
Q

Cash “in advance” refers to ______________ which is a _________ (think LSU getting ticket money before playing games)

A

Unearned service revenue; liability

91
Q

“Services performed” refers to _________ which is part of ___________

A

Revenue; stockholders equity

92
Q

“On Account” refers to either ___________ or __________

A

Accounts payable; accounts receivable

93
Q

_______ means left

A

Debit

94
Q

_______ means right

A

Credit

95
Q

The idea that each transaction must affect 2 separate accounts in order to keep everything in balance is called what?

A

Double-entry system

96
Q

________ must equal _______

A

Debits; credits

97
Q

Debits > Credits results in a _______ balance

A

Debit

98
Q

Credits > Debits results in a _______ balance

A

Credit

99
Q

What records the increase or decrease in a specific asset, liability, equity, revenue, or expense item?

A

T-Accounts

100
Q

________ , ________ , and __________ are normally debited and on the left side of the accounting equation

A

Assets, Expenses, Dividends

101
Q

_________ , __________ , __________ , and _________ are normally credited and on the right side of the accounting equation

A

Liabilities, Revenues, Common Stock, and Retained Earnings

102
Q

What provides evidence of a transaction and is analyzed before starting the recording process?

A

Source documents

103
Q

In the recording process, you record transactions in the _______ (journal or ledger) first and then in the ________ (journal or ledger)

A

Journal; ledger

104
Q

Entering transactions in to a journal is referred to as ________

A

Journalizing

105
Q

Transferring the journal entries in to the ledger is referred to as __________

A

Posting

106
Q

In the journal, transactions are listed in ____________ order

A

Chronological

107
Q

In the journal, ________ are first and ________ are indented on a separate line

A

Debits; credits

108
Q

The ________ contains the entire group of accounts maintained by a company

A

Ledger

109
Q

The listing of accounts used by a company to record transactions is called the _________ ___ __________

A

Chart of accounts

110
Q

A list of accounts and their balances at a given time is known as the _________

A

Trial balance

111
Q

The order of accounts in the trial balance is:

A
  • Assets
  • Liabilities
  • Stockholders Equity
  • Revenues
  • Expenses
112
Q

True or False: A trial balance is always free from error

A

False; trial balances may still balance even if a transaction was not journalized, not posted or posted twice, the incorrect accounts were used, or offsetting errors were made

ACCT 2000 (10 decks)

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