Financial Statements Flashcards
Sole Proprietorship
A business owned by one person.
• Simple to set up
• Controlled by you
Partnership
Business owned by two or more people.
• Shared control
• More resources
Corporation
A business organized by separate legal organization that are owned by stockholders.
• Easy to transfer and raise funds
• No personal liability
Investors
People who use accounting information to make decisions to buy, hold, or sell stocks.
Creditors
Suppliers and bankers who use account information to evaluate the risks of selling on credit or lending money.
Sarbanes Oxley Act
Reduces unethical corporate behavior and decreases future corporate scandals.
Financing Activities
The action of borrowing money and selling shares of stocks for money.
• Liabilities and Common Stock
Liabilities
Money owed to creditors (money lenders/stock issuers).
- Notes Payable (repay creditors $ within same year)
- Bonds Payable (repay creditors $ in future years)
Common Stock
The amount of money paid by stockholders for shared stocks.
Stockholders
Those who hold stocks but have no claim to corporate cash until claims of creditors are satisfied.
Dividends
Money paid to stockholders.
Investing Activities
Usage of money raised from financing activities to buy resources (assets) of their own to operate.
Assets
Resources owned by a business.
Investments
Another example of investing activities which involves usage of the xtra money to invest in stocks or bonds.
Revenues
Earned $ that can be used to buy more assets or decrease liabilities (debt).
