ACCT 2101 Kris Clark

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ACCT 2101 Kris Clark
2012-08-30 12:01:01
ACCT 2101 Chapter

Chapter 1 Notes
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  1. What are the two types of stakeholders?
    Internal and External
  2. Which persons are categorized under internal and external?
    • Internal: Owners, Managers, Employees
    • External: Customers, Competition, stockholders, insurance companies, and banks
  3. Define a sole proprietorship business
    • maximum of one owner
    • is easy to form
    • unlimited liability
    • when the owner dies the company dies
  4. Define a partnership business
    • 2+ (unlimited) owners
    • easy to form
    • unlimited liability
    • when the owners die the company dies
  5. Define a corporation
    • double taxed
    • limited liability
    • unlimited owners 
    • continues forever even if owner dies
    • requires a legal process to be created.
  6. What are the basic concepts of Accounting?
    • Business entity
    • Monetary Unit
    • Going Concern
    • Periodicity
  7. Define business entity
    Keep business and personal records separate
  8. Define monetary unit
    Maintain business records in currency
  9. Define going concern
    Business will continue past the current period
  10. Define periodicity
    Profits/losses must be determined periodically
  11. Define assets
    Right to use resources with future benefit
  12. Define liability
    Obligation to transfer resources in the future to suppliers of good and services
  13. Define owner's equity
    Net assets belonging to owners (Common stock, Retained earnings)
  14. Revenues - __?__ = Net Income (Loss)  Also what do you call this formula?
    • Expenses
    • Accrual basis of accounting
  15. These words "Incurred" and "Used" are used to describe what?
    An expense
  16. Define accrual
    Money being recieved by someone in regular or in increasing amounts over time.
  17. What is the Accounting Equation?
    Assets = Liabilities + Equity

    (A = L + OE)
  18. How do you calculate owners equity?
    Assets - Liabilities = Owner's Equity
  19. Name the 4 basic financial statements
    • Income Statement
    • Statement of Owners' Equity
    • Balance Sheet
    • Statement of Cash Flows
  20. What does GAAP and IFRS stand for?
    • Generally Accepted Accounting Principles
    • International Financial Reporting Standards
  21. Define income statement
    Indicates revenues less expenses = net income for a period of time
  22. Define balance sheet
    Indicates the ending balances of assets, liabilities, and owners' equity at a point in time
  23. Define statement of owners' equity
    Indicates changes in owners' equity for a period of time
  24. Define statement of cash flows
    Indicates cash inflows and outflows from operating, investing, and financing activities for a period of time
  25. Name the two components of Owners' Equity
    • Retained earnings
    • Capital/Common stock
  26. Are expenses liabilities?
  27. Is COGS (Cost of Goods Sold) a liability or a expense?
  28. What is the current ratio formula?
    Current Assets / Current Liabilities
  29. What is the debt to equity ratio formula?
    Total Liabilities / Total Owners' Equity
  30. What is the return on sales ratio formula?
    • Net Income / Sales  OR
    • Revenue - Expenses / Sales
  31. 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.
  32. 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.
  33. 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.