1. Nature of accounting Flashcards
-Single owner
-Not a legal entity
-Unlimited liability
-Easy to form
-Limited life (while owner is alive)
-Taxation = personal income
Sole proprietorship
-2 or more owners
-Not a legal entity
-Unlimited liability
-Easy to form
-Limited life (all owners are living)
-“Pass through taxation”
Partnership
-Separate legal entity
-Limited liability
-More difficult to form
-Double taxation (business and owner’s money)
-C-corp, S-corp
-1 or more owners
-Public vs private
-Unlimited life (stock transfer)
Corporation
Usual business operations of a company
-Ex. Selling products, providing services
Operating activities
Purchasing and/ or the sale of resources
-Ex. Depending on business’s day to day. Could be buying buildings, cars, ect.
Investing activities
Having to do with debt (loan) or equity (raise money by selling stock)
Financial activities
Measure and communicate financial info by:
-analyzing
-recording
-classification
-summarization
-reporting
-interpretation of financial statements
Accounting
Recording financial info in a prescribed manner
Bookkeeping
What is comparison in accounting?
Being able to compare different companies because of a standard format
Type of accounting that produces financial statements.
-Internal and external use
Financial accounting
Type of accounting that prepares records/ reports for tax filing
Tax accounting
Type of accounting that deals with internal reports and decisions regarding operations
Managerial accounting
What is the GAAP and who makes it?
Generally accepted accounting principles. Creates by the Financial accounting standards board (FASB), Emerging issues task force (EITF), AICPA, SEC, AAA.
-Internationally created by IASB and IFRS
Property of monetary value owned by a business
-Probably future economic benefit
-“Make the business money”
Assets
Any debt a business owes
-Probable future sacrifices of economic benefit
-“Costs the business money”
Liabilities
