Accounting Final Exam Study Guide

sole proprietorship

simple, control, tax advantages; personal liability

partnership

easy, broader skills, tax advantages; personal liability

corporation

easy to sell. Raise capital, no liability; double taxation

what are the three forms of business?

1. sole proprietorship

2. partnership

3. corporation

internal users

external users

investing activities

financing activities

operating activities

what are the four financial statements?

1. income statement

2. retained earnings statement

3. balance sheet

4. statement of cash flow

what are the components of an annual report?

what are the three ratios?

1. profitability

2. solvency

3. liquidity

profitability ratio

operating success

solvency ratio

meet long term needs

liquidity ratio

meet short term needs

GAAP

generally accepted accounting principles

• rules

FASB

makes the rules

relevant

information that makes a difference in a decision; predictive value/ confirmatory

faithful representation

disclose what really happened; complete, neutral, and free from error

comparability

consistency

verifiability

timeless

understandability

Monetary Unit assumption

economic entity assumption

periodicity assumption

going concern assumption

acccrual assumption

full disclosure assumption

cost principle assumption

know the accounting equation