Chapter 2 Flashcards Preview

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Flashcards in Chapter 2 Deck (22):
1

profit

the amount of money earned over and above the amount spent to keep the business operating

2

loss

businesses that spend more money they earn

3

entrepreneurs

people who transform ideas for products or services into real-world businesses

4

capital

money supplied by investors, banks, or owners of a business

5

service business

provides a needed service for a fee

6

merchandising business

buys finished products and resells them to individuals or other businesses

7

manufacturing business

buys raw materials, such as wood or iron ore, and transforms them into finished products through the use of labor and capital

8

sole proprietorship. give the advantages and disadvantages

business owned by one person

advantages
- owner has total control
- all profits go to owner
- easy to set up

disadvantages
-limited expertise
- hard to raise money
- owner has all risks

9

partnership. give the advantages and disadvantages

a business owned by two or more persons, who agree to operate a business as co-owners

advantages
- easy to start
- skills and talents are pooled
- more money is available

disadvantages
- conflicts between owners
- profits must be shared
- owners share all risks

10

corporation. give the advantages and disadvantages

a business organized that is recognized by law to have a life of its own. owned by stockholders

advantages
- easy to raise money
- easy to expand
- easy to transfer ownership

disadvantages
- costs more to start up
- complex to organize
- higher taxes

11

charter

a legal permission that gives a corporation certain rights and privileges

12

accounting system

designed to collect, document, and report on financial transactions affecting the business

13

manual accounting system

info processed by hand

14

computerized accounting system

info recorded by putting into computer

15

GAAP

Generally Accepting Accounting Principles, to prepare their reports

16

financial reports

summarized info about financial status of a business

17

financial accounting

focuses on reporting info to external users

18

management accounting

focuses on reporting info to management, is often referred to as accounting for internal users of accounting info

19

business entity

personal and business records are kept separate

20

accounting period

period of time Fiscal Year

21

going concern

expect the business to survive and continue

22

free enterprise system

where people are free to produce the goods and services they choose.