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TAMU ACCT 229 - Exam 1 Questions Graded A
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TAMU ACCT 229 - Exam 1
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TAMU ACCT 229 - Exam 13 types of businesses - answer sole proprietorship, partnership, corporation
unlimited liability - answer sole proprietorship & partnership
limited liability - answer corporation
Sole Proprietorship - answer one owner
advantage: easy to form
separate entity for accounting purposes
not a separate entity for legal purposes or tax purposes
Partnership - answer two or more owners
separate entity for accounting purposes
not a separate entity for legal or tax purposes
Corporations - answer business incorporated under the laws of a particular state.
Advantages: limited liability, continuity of life, ease in transfer of stock (ownership),
opportunity to raise large amounts of money by selling shares of stock to a large
number of people.
3 types of business activities - answer financing, investing, operating
Operating Activities - answer everyday activities
-sell inventory, pay employees
Investing Activities - answer how you grow your company
-buying building, equipment, vehicles, fixtures
Financing Activities - answer how you pay for your growth
-borrow money: temporary financing
-issue stock: permanent
4 financial statements - answer Income statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
What does a balance sheet show? - answer Shows the financial position of a company
at a point in time. A = L + SHE
, Assists - answer what a company owns, or what is owed to a company
Liabilities - answer what the company owes
Stockholders Equity - answer ownership. (common stock & retained earnings)
Monetary Unity Assumption - answer Only transactions that can be expressed in terms
of money can be included in the accounting records
Economic Entity Assumption - answer Activities of the business are separate from
activities of the owners
Time Period Assumption - answer The long life of a company can be reported over a
series of shorter time periods. Makes it possible to prepare the Income Statements for a
specific time period.
Going Concern Assumption - answer The company will not go out of business in the
near future. Not liquidating.
Historical Cost Principle - answer record assets at the cost paid to acquire them
Full Discloser Principle - answer Provide all information sufficiently important to
influence decision
GAAP - answer Generally Accepted Accounting Principles. Rules and assumptions
under which financial statements must be prepared. (USA).
SEC - answer Securities and Exchange Commission.
-ultimate authority -THE ENFORCER
FASB - answer Financial Accounting Standards Board.
-sets accounting standards in the US
AICPA - answer American Institute of Certified Public Accountants.
-advises FASB. Professional organization for CPAs
PCAOB - answer Public Company Accounting Oversight Board.
-set audit standards
IASB - answer International Accounting Standards Board.
-created in 2001. Developed world wide accounting standards
IFRS - answer International Financial Reporting Standards. (principle based)
-US adoption
-many countries currently using
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