Test 1 Ch 1 Flashcards
Service Company
Provides a service only.
- No inventory
- Example: Doctors,Lawyers, Bankers
Manufacturing Company
Use Labor and other inputs to convert raw materials into finished products.
- 3 Inventory accounts
- Crayola Crayons, Dell Computers, Craftsman Tools
Merchandising Company
- Resell Products purchased FROM SUPPLIERS.
- One inventory account (asset not xp until sold).
- Examples: Amazon.com, Sears
- Retailers vs. Wholesalers
Sole Proprietorship
A form of business that is owned and operated by one person
Partnership
An association of two or more persons to carry on a business for profit.
Corporation
A body formed and authorized by law to act as a single person, distinct from its members or owners
What types of regulations must companies comply with?
Local - pollution control, health permits, zoning regulations
state - state income tax, franchise tax, state unemployment taxes
federal - IRS rules, monitoring safety, competition, workplace discrimination
international
How does accounting assist with the planning, operating, and evaluating of a business’s operations
information is recorded and reported on identifying, measuring, recording, and summarizing information about a company’s activities to be communicated in reports
What does GAAP stand for
Generally Accepted Accounting Principles
financial accounting
- external audience (investors/stockholders) helps them decide to invest or not
-follows GAAP rules - reports basic financial statements like income statement, balance sheet, statement of changes in owners’ equity
statement of cash flows
managerial accounting
- internal audience (managers)
- helps them w/ planning operating evaluating, reports on goals/standards/benchmarks, production/pricing/hiring/purchasing, and feedback/budget to actual/cost reports/profitability
Components of an income statement
Revenues
Expenses
Gains
Losses
Components of a balance sheet
assets, liabilities, and net worth or equity
asset
a resource with economic value that a business owns with the expectation that it will provide future benefit to the business
liabilities
obligations the business owes
owners’ equity
the residual interest in the assets of the entity after the deduction of its liabilities
revenues
an inflow of economic benefits (or saving in ouflows) in the form of an increase in assets (or decrease in liabilities) that increases owners equity excepr foe capital contributions by the owner
expenses
an outflow or consumption of economic benefits (or reduction in inflows) in theform of a decrease in assets (or increase in liabilities) that reduces owners equity except for drawings by the owner
