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What are the two types of stakeholders?
Internal and External
Which persons are categorized under internal and external?
- Internal: Owners, Managers, Employees
- External: Customers, Competition, stockholders, insurance companies, and banks
Define a sole proprietorship business
- maximum of one owner
- is easy to form
- unlimited liability
- when the owner dies the company dies
Define a partnership business
- 2+ (unlimited) owners
- easy to form
- unlimited liability
- when the owners die the company dies
Define a corporation
- double taxed
- limited liability
- unlimited owners
- continues forever even if owner dies
- requires a legal process to be created.
What are the basic concepts of Accounting?
- Business entity
- Monetary Unit
- Going Concern
Define business entity
Keep business and personal records separate
Define monetary unit
Maintain business records in currency
Define going concern
Business will continue past the current period
Profits/losses must be determined periodically
Right to use resources with future benefit
Obligation to transfer resources in the future to suppliers of good and services
Define owner's equity
Net assets belonging to owners (Common stock, Retained earnings)
Revenues - __?__ = Net Income (Loss) Also what do you call this formula?
- Accrual basis of accounting
These words "Incurred" and "Used" are used to describe what?
Money being recieved by someone in regular or in increasing amounts over time.
What is the Accounting Equation?
Assets = Liabilities + Equity
(A = L + OE)
How do you calculate owners equity?
Assets - Liabilities = Owner's Equity
Name the 4 basic financial statements
- Income Statement
- Statement of Owners' Equity
- Balance Sheet
- Statement of Cash Flows
What does GAAP and IFRS stand for?
- Generally Accepted Accounting Principles
- International Financial Reporting Standards
Define income statement
Indicates revenues less expenses = net income for a period of time
Define balance sheet
Indicates the ending balances of assets, liabilities, and owners' equity at a point in time
Define statement of owners' equity
Indicates changes in owners' equity for a period of time
Define statement of cash flows
Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time
Name the two components of Owners' Equity
- Retained earnings
- Capital/Common stock
Are expenses liabilities?
Is COGS (Cost of Goods Sold) a liability or a expense?
What is the current ratio formula?
Current Assets / Current Liabilities
What is the debt to equity ratio formula?
Total Liabilities / Total Owners' Equity
What is the return on sales ratio formula?
- Net Income / Sales OR
- Revenue - Expenses / Sales
What does the 1st concept statement state?
Financial reporting should provide external users with a set of financial information known collectively as the financial statements.
What does the 2nd concept statement state?
Benefits received from accounting information must exceed the cost of providing the information. The information also needs to be relevant and also reliable.
What does the 4th concept statement state?
This is a statement geared towards non-profit organizations. Non-profit (nonbusiness) organizations are similar to those of business enterprises, because they still provide useful information to external decision makers.