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Flashcards in Chapter 1 Deck (41):
1

Sole Proprietorship

Individually owned

2

Partnership

Joined with another person

3

Corporation

Receive shares of stock to indicate ownership

4

Benefits of Sole Proprietorship

Simple to set up, Owner controlled, Tax advantages

5

Benefits of partnership

Simple to establish, shared control, broader skills and resources, tax advantages

6

Benefits of Corporation

Easier to transfer ownership (sell stocks), easier to raise funds, No personal liability, separate entity

7

Accounting

The information system that identifies, records, and communicates the economic events of an organization to interested users.

8

Internal users

Those who are within the company that use internal reports to make decisions. Ex: Marketing managers, management, finance, human resources

9

External Users

Those who look at financial statements. Investors, creditors, taxing authorities, customers, labor unions, regulatory agencies

10

Sarbanes Oxley Act of 2002

Law passed to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals.

11

3 types of business activity

1. Financing 2. Investing 3. Operating

12

Financing

Personal savings or banks-anything you do to get cash in company. Liabilities, creditors, common stock, dividends, notes/bonds payable.

13

Creditors

Person or entities to whom a company owes money to

14

Common Stock

Total amount paid in by stockholders for the shares they purchase

15

Dividends

Payments to stockholders as long as there is sufficient cash flow

16

Investing

Purchasing products for business-property, plant, equipment, assets, investments

17

Operating

Making and selling
-expenses, liabilities, net income, net loss, accounts receivable, revenue

18

Assets

Resources owned by a business that can easily be converted to cash

19

Revenue

Increase in assets or decrease in liabilities- NOT net income
3 types- sales, service, interest

20

Supplies

assets used on a day to day basis

21

Inventory

Goods available for future sales

22

Accounts receivable

Right to receive money in the future

23

Expenses

Cost of assets consumed or services used in the process to generate revenue

24

Accounts payable

obligation to pay for goods (Liability)

25

Net income

When revenues exceed expenses (Rev-Exp)

26

Net loss

When expenses exceed revenue

27

Financial Statement

Give information to external users about company
4 Types

28

4 Types of financial statements

1. Income statement 2. Balance sheet 3. Retained earnings 4. Statement of cash flow

29

Income statement

show how successfully your business preformed during a period of time-shows expenses and revenues

30

Retained earnings

Shows how much money is left after paying everything off.

31

Balance sheet

Shows what the business owes and owns-Assets, liabilities, stock holders equity

32

Stockholders equity

Common stock and retained earnings
Retained earnings= revenues, expenses, dividends

33

Basic accounting equation

Assets= Liabilities + Stock holders equity

34

Notes to the financial statement

clarify statement and provide addition notes

35

Auditor

Accounting professional who conducts examinations of companies

36

Auditors report

Statement by auditor about their opinions as to fairness of the presentation of the financial position and results of a company

37

Hybrid Forms

Sole and partnership combined- tax advantages of partnership with limited liability of corporation

38

2 primary sources of outside funds (financing)

1. borrowing money
2. issuing (selling) shares of stock for cash

39

SEC

determine rules to be followed in preparing financial statements by companies whose securities are sold to general public

40

FASB

Set standards

41

Statement of Cash Flows

Only shows cash- categorized by business activity