Accounting midterm

Card Set Information

Accounting midterm
2012-01-22 15:19:31

Show Answers:

  1. Product
    • amount of money earned over and above the amount spent to keep the business operating.
    • is when revenue is greater than expenses
  2. Loss
    • Businesses that spend more money than they earn
    • when expenses are greater than revenue
  3. Sole proprietorship
    a business owned by one person
  4. Advantages of sole proprietorship
    • . easy to set up
    • · all profits go to owner
    • · owner has total control.
    • · Few regulations to follow.
    • · e being your own boss
    • · pride of ownership no special taxes
  5. Disadvantages of sole proprietorship
    • . Limited expertise
    • · Hard to raise money
    • · Owner has all the risks
    • · Hard to attract talented employers
    • · overwhelming time commitment limited life span
  6. Partnership
    a business owned by two or more persons who agree to operate the business as co-owners
  7. Advantages of partnership
    • · Easy to start
    • · Skills and talents are pooled.
    • · More money available.
    • · Shared management and pooled knowledge.
    • · Longer survival.
  8. Disadvantages of partnership
    • · Conflict between partners
    • · Profits must be shared
    • · Owners share all the risks (unlimited liability)
    • · Difficult to terminate.
  9. Corporation
    a business organization that is recognized by law to have a life of its own
  10. Advantages of Corporation
    • Easier to raise money
    • Easy to expand
    • Easy to transfer ownership
    • Losses limited to investment
    • Perpetual life (Can live forever)
    • Size
    • Ease of drawing talented employees
    • Separation of ownership from management
  11. Disadvantages of Corporation
    • · Costs more to start up
    • · Complex to organize
    • · More regulations
    • · Higher taxes
    • · Paperwork
    • · Two tax returns
    • · Size
    • · Difficult to terminate
    • · Double taxation
    • · Possible conflict with broad directions
  12. Financial Claims
    a legal right to an item
  13. Assets
    property or items of value owned by a business
  14. Owner’s equity
    The owners claims to the assets of the business
  15. Liabilities
    the creditor claims to the assets of the business
  16. Accounting Equation
    The accounting relationship between assets and the two types of equities

    Assets= liabilities + owners equity

    is the basis for keeping all accounting records In balance.
  17. Accounts receivable
    the total amount of money owed to a business
  18. Accounts payable
    is the amount owed or payable to the creditors of a business
  19. Double entry accounting
    is a system of record keeping in which each business transaction affects at least two accounts
  20. Calendar year
    accounting period that goes along with the calendar
  21. Fiscal year
    Business chooses the accounting period
  22. Going concern
    accountants must assume that the business has the ability to survive and operate indefinitely