EXAM1-BS@%!

How many forms of business organizations are there?

3

What are the 3 different types of business organizations?

sole proprietorship

What is a sole proprietorship?

one owner

what is a partnership?

two or more owners

what is a corporation?

stockholder owners (a separate legal entity)

what are the different types of users of financial information?

internal and external

what are the different types of business activities?

operating

What is the accounting equation?

Assets = Liabilities + Stockholders' Equity

what is the income statement equation?

Revenues - Expenses = Net Income

what is the retained earnings equation?

beginning retained earnings + net income - dividends = ending retained earnings

what is the balance sheet equation?

Assets = Liabilities + Stockholders' Equity

what is the statement of cash flows equation?

cash flows from operation

what is interrelationships?

ties in to preparing the statements from adjusted trial balance

what are the other things in the annual report?

MD&A

what is on the balance sheet?

assets

what is on the statement of stockholders equity?

retained earnings plus stock changes

what is a ratio analysis?

comparing a company to other companies

what measures operating success earnings per share (profit margin)?

profitability ratios

what is the ability to pay bills as they come due (working capital

current ratio)?

what is the ability to fulfill long term goals (debt to total assets)?

solvency ratios

what are there fundamental qualities?

relevance and faithful representation

what makes a difference (predictive

confirmatory value

what is an accurate depiction (complete

neutral and free from error)?

what is comparability

verifiability

what is monetary unit

economic entity

what is historical cost principle

fair value principle

what types of accounts are debited to increase?

asset

what accounts are credited to increase?

liabilities

normal account balance

the side which increases an account

journal

journalizing

ledger

posting

trial balance

use and limitations

What is the revenue recognition principle?

revenues are recorded when earned (service obligation is met)

What is the expense recognition principle?

expenses are matched to revenues and recorded when incurred

Accrual VS cash basis of accounting -- which is according to GAAP?

accrual

What are permanent accounts?

assets

What are temporary accounts?

revenues

why do the temporary accounts close?

makes revenues