ACCOUNTING 201 FINAL STORMBERG
Sole Proprietorship - CORRECT ANSWER-A business owned by one person;
control+simple+owner controlled+tax advantages
Partnership - CORRECT ANSWER-A business in which two or more persons
combine their assets and skills; formed often because one person does not have
enough resources+should formalize duties
Corporation - CORRECT ANSWER-A business owned by stockholders who share in
its profits but are not personally responsible for its debts; easier to transfer
ownership+easier to raise funds+no personal liability
Accounting - CORRECT ANSWER-The information system that identifies, records,
and communicates the economic events of an organization to interested users.
internal users - CORRECT ANSWER-managers who plan, organize, and run a
business such as marketing managers or internal auditors
External Users - CORRECT ANSWER-Persons using accounting information who
are not directly involved in running the organization. EX. IRS or Labor Unions
Accounting Information System - CORRECT ANSWER-keeps track of various
business acitivities
liability - CORRECT ANSWER-amounts owed to creditors in form of debt and other
obligations
common stock - CORRECT ANSWER-Term used to describe the total amount paid
in by stockholders for the shares they purchase.
Investing Activities - CORRECT ANSWER-after raising, company uses money in
investing to buy the "big stuff" (ex. PPE, intangibles, long-term investments, and
other long term assets)
Assets - CORRECT ANSWER-resources owned by a business
Operating Activities - CORRECT ANSWER-transactions that relate to the primary
operations of the company (short-term assets) -> getting to work
inventory - CORRECT ANSWER-goods available for future sales to customers
,supplies - CORRECT ANSWER-assets used in day-to-day operations
revenues - CORRECT ANSWER-Amounts earned from delivering goods or services
to customers; recognized when business does what it is intended to do
account receivable - CORRECT ANSWER-the company's right to collect cash in the
future
expenses - CORRECT ANSWER-the costs incurred in the day-to-day operations of
an organization
Cost of Goods Sold - CORRECT ANSWER-the total cost of merchandise sold during
the period
Net Income (loss) - CORRECT ANSWER-Revenues - Expenses
income statement - CORRECT ANSWER-A financial statement showing the revenue
and expenses for a fiscal period -> net income (specific time period); creditors look at
when deciding loans
Retained eanings - CORRECT ANSWER-retained earnings = Previous RE + NI - Div
Retained Earnings Statement - CORRECT ANSWER-A financial statement that
summarizes the amounts and causes of changes in retained earnings for a specific
time period. (Specific time period)
Balance Sheet - CORRECT ANSWER-reports assets and claims to assets at a
specific point in time (snapshot)
Retained Earnings - CORRECT ANSWER-Net Income retained
statement of cash flows - CORRECT ANSWER-provides financial information about
the cash receipts and cash payments of a business for a specific period of time
annual report - CORRECT ANSWER-a yearly statement of the financial condition,
progress, and expectations of an organization
Management's Discussion and Analysis - CORRECT ANSWER-provides
management's views on the company's ability to pay near-term obligations, its ability
to fund operations and expansion, and its results of operation
, Notes to the financial statements - CORRECT ANSWER-clarify information
presented in the financial statements and provide additional detail.
Auditor's Report - CORRECT ANSWER-A report prepared by an independent
outside auditor stating the auditor's opinion as to the fairness of the presentation of
the financial position and results of operations and their conformance with generally
accepted accounting principles. -> unqualified opinion if fair
Sarbanes-Oxley Act - CORRECT ANSWER-Regulations passed by Congress to
reduce unethical corporate behavior.
Classified Balance Sheet - CORRECT ANSWER-groups together similar assets and
similar liabilities, using a number of standard classifications and sections
current assets - CORRECT ANSWER-Assets that companies expect to convert to
cash or use up within one year or the operating cycle, whichever is longer.
Operating Cycle - CORRECT ANSWER-The average time required to purchase
inventory, sell it on account, and then collect cash from customers—that is, go from
cash to cash.
Assets in order of liquidity - CORRECT ANSWER-cash, short-term investments,
accounts receivable, inventories, prepaid
long term assets - CORRECT ANSWER-assets that are expected to be used in
business operations for longer than one year
Property, Plant, and Equipment - CORRECT ANSWER-assets with relatively long
useful lives that are currently used in operating the business (land or building)
Depreciation - CORRECT ANSWER-the allocation of the cost of an asset to its
useful life
accumulative depreciation - CORRECT ANSWER-shows total amount of
depreciation
intangible assets - CORRECT ANSWER-assets that do not have physical substance
but are very valuable (ex. goodwill) -> exclusive right
long-term liabilities - CORRECT ANSWER-obligations that a company expects to
pay after one year
Stockholders' Equity - CORRECT ANSWER-common stock and retained earnings
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