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Accounting Chapter 1
Accounting 203 GMU - chapter 1
| Question | Answer |
|---|---|
| forms of business organization | Sole proprietorship, partnership,corporation |
| sole proprietorship | a business owned by one person |
| partnership | two or more people associated a partners |
| corporation | a business organized as a separate legal entity owned by shareholders |
| Accounting | the information system that identifies, records and communicates the economic events of an organization to interested users |
| users of accounting system | internal users, and external users |
| types of internal users | marketing managers, production supervisors, finance directors and company officers |
| types of external users | investors, creditors. tax authorities, customers, labor unions, regulatory agencies |
| three types of business activity | operating, investing, financing |
| financing activities - two primary sources of funding | borrowing money and issuing shares |
| liabilities | amount owed to creditors ex: bonds payable, notes payable. |
| bonds payable | debt securities sold to investors that must be repaid |
| note payable | money borrowed from a bank |
| give an example of investing activities | purchase of assets |
| assets | resources owned by a business. ex: property, plant, and equipment, cash, investments. |
| give an example for operating activity | revenue. ex: sales revenue, interest revenue , services revenue |
| give an example of short lived assets | supplies |
| expenses | costs of assets. ex: cost of goods sold, marketing expenses, selling expenses, admin expenses income tax, interest expenses. |
| accounts payable | obligation to pay for goods on credit. |
| the four financial statements | income statement, retained earnings statement, balance sheet, statement of cash flows |
| what does the income statement report? | reports revenues and expenses |
| retained earnings statement | the net income retained in the corporation |
| what is the balance sheet made from | assets, liabilities and stockholders equity |
| basic accounting equation | assets = liabilities + stockholders equity |
| on the balance sheet stockholders equity is comprised of what two parts ? | common stock, and retained earnings |
| statement of cash flows | financial information about cash receipts and cash payments of a business for a specific period of time. |
| what company activity is reported on the statement of cash flows | operating, investing, and financing |
| three additional reports | management discussion and analysis, notes to the financial statements , and independent auditors report |
| MD&A | management discussion and analysis. ability to pay near-term obligations, ability to fund operations and expansion, results of operation. |
| unqualified opinion |
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goudakid78
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