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ACCT 229 TAMU Unit 1 (Ch 1-4) Questions and Answers 2024
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ACCT 229 TAMU Unit 1 (Ch 1-4)
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ACCT 229 TAMU Unit 1 (Ch 1-4)business - answerall activities necessary to provide the members of an economic
system with goods and services
3 forms of business organization - answer-sole proprietorship
-partnership
-corporation
sole proprietorship - answerone owner
advantage: easy to form
disadvantage: unlimited liability by the owner
partnership - answertwo or more owners; profits or losses are divided among the
owners
advantage: easy to form
disadvantage: unlimited liabilitiy
corporation - answerbusiness incorporated under the laws of a particular state. must file
a charter and bylaws with the state. board of directors make decisions, shareholders all
have partial ownership
disadvantage: startup effort
advantages of corporation - answer-limited liability for all owners
-continuity of life - theoretically goes on forever
-ease in transfer of ownership (stock)
-can raise large amounts of money through selling shares of stock
3 types of business activities - answerfinancing, investing, operating
Financing - answer-how a company pays for growth/expansion/startup
- ex. issuing shares of common stock or borrowing money from bank
investing - answer-purchasing resources to be used in day to day operations
-ex. land, buildings, equipment, patents, etc
operating - answer-activities that earn revenue and generate expenses
-ex. selling goods, paying rent, paying utilities, etc
purpose of accounting - answerto identify, measure, and communicate information
about a company that is useful in making economic decisions
, 2 types of user group - answerexternal and internal
external user group - answer-ex. investors, shareholders, creditors, IRS
-needed info: stewardship (profitable or not?), valuation, liquidity
-how they get info: quarterly and annual financial statements
internal user group - answer-ex. managers, directors, CEO/CFO
-needed info: budget, planning/forcasting
-how they get info: financial statements, managerial accounting
4 types of financial statements - answer1. balance sheet
2. income statement
3. statement of retained earnings
4. statement of cash flows
balance sheet - answer-shows the financial position of the company at a SINGLE
POINT in time
-uses THE accounting equation
THE accounting equation - answerAssets = Liabilities + Stockholder's Equity
Assets - answerresources that will produce a future economic benefit, held by the
company
-ex. cash, accounts receivable, buildings, land, etc
liabilities - answerdebt owed to creditors, suppliers, employees, or customers
-ex. (anything) payable, unearned revenue
equity - answerfinancing provided by owners and operations of the company
= Retained earnings + common stock
common stock - answerinvestments made by owners
retained earnings - answercumulative earnings of the company that have been retained
(reinvested; not paid out)
RE beginning balance (Jan 1)
+Net Income
- Dividends
= RE end balance (Dec 31)
The income statement - answer-shows the results of the company's operations for a
PERIOD of time
- finds net income
net income - answer=Revenues - Expenses
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