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Flashcards in chapter 1 Deck (37):
1

Sole proprietorship

A business owned by one person

simple to set up and gives control

more favorable tax treatment

More liability

2

Partnership

A business owned by two or more persons 

Simple to establish

Broader skills and resources

Tax advantages

More liability

3

Corporation

A business organized as a seperate legal entity owned by stockholders

Easier to transfer ownership

Easier to raise funds

No personal liability

4

Accounting

The information system that identifies, records, and communicates the economic events to interested users

5

Internal users

Managers who plan, organize, and run a business

ex. marketing manager, production supervisor, comapny officer, finance director

6

External users

Investors

Creditors

Taxing authorities

Customers

Labor unions

Regulatory agencies

7

Investors

use accounting info to make decisions about stocks

8

Creditors

use accounting info to evalulate the risks of selling on credit or lending money

9

Taxing authorities

want to know whether a comapny is following tax laws

10

creditors

people to whom money is owed

11

Bonds payable

Debt securities sold to investors that must be repaid at a particular date some years in the future

12

Liablities

Amounts owed to creditors-in the form of debt and other obligations

13

common stock

the total amount paid in by stockholders for the shares they purchase

14

Dividends

Payments to stockholders

15

assets

Resources owned by a business

16

Revenue

The increase in assets resulting from the sale of a product or service

17

Inventory

Goods available for future sales to customers

18

Account receivable

The right to receive money in the future

19

Expenses

The cost of assets consumed or services used in the process of generating revenues

20

Net income

When revenue exceeds expenses

21

Net loss

When expenses exceed revenues

22

income statement

Reports the success or failure of the company's operations for a period of time

23

Retaind earnings

The net income retained in the corporation

24

Retained earnings statement

Shows the amounts and causes of changes in retained earnings during the period

25

Balance sheet

Reports assets and claims to assets at a specific point in time

26

Stockholders' equity

Claims of owners

27

Basic accounting equation

assets = liabilities + stockholders' equity

28

statement of cash flows

provides financial information about the cash receipts and cash payments of a business for a specific period of time

29

Anual report

Provided by shareholders by publicly traded companies including financial statements

30

Management discussion and analysis (MD&A)

Covers the companies ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations

31

Notes to the financial statements

Clarify the financial statements and provide additional detail

32

Auditor's report

States the auditor's opinion as to the fairness of the presentation of the financial position of the company

33

auditor

an accounting professional who conducts an independent examination of a compnay's financial institutions

34

unqualified opinion

If the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and is accepted in accounting principles

35

Certified Public Accountant

An individual who has met certain criteria and is thus allowed to perform audits of corporations

36

Sarbanes-Oxley Act

Regulations passed by Congress in 2002 to try to reduce unethical corporate behavior

37