Accounting Chapter 1

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  1. Sole proprietorship
    • - Own by one person
    • - Easy to set-up
    • - Personal liable for business debt
  2. Partnership
    • - Own by more than one person
    • - Partner are all Liable
  3. Corporation
    • - Owner are shareholders
    •    - Are not liable for business debt
    • - Subject to many regulations
    • - Separate legal entity
  4. Accounting
    A system of analyzing, recording, and summarizing the results of a business activities and then reporting the results to decision makers
  5. Management Accounting
    Working from the inside of the company
  6. Financial accounting
    Working from the outside of the company
  7. Asset = Liability + Shareholder's Equity
    Measurable values = Debts + Contributed capital/ Retained earning
  8. Net Income
    Revenues - Expenses
  9. Financial Statements is prepare in what order?
    • 1. Income Statement 
    • 2. Statement of Retained 
    • 3. Balance sheet
    • 4. Statement of cash flows
  10. Corporation Advantage/Disadvantage
    • Advantage - Owner cannot lose more than their investment
    • Disadvantage - legal fee for creating a corporation, income taxes returns must be files for both the corporation and its owner
  11. Managerial Accounting reports
    • Detailed financial plans and continually updated reports about the operating performance of the company
    •    - For internal users
  12. Primary external group
    • Creditors: anyone to whom money is owed, banks, suppliers
    • Investors - Shareholders
    • Other - Customers
  13. Shareholders' Equity
    Contributed capital + Retained Earnings
  14. Incurred
    The activities giving rise to a cost
  15. Cost principle
    Assets are initially reported on the balance sheet based on their original cost to the company
  16. Main interested of Creditor
    • 1. Is the company making enough to paid their load - through cash flow
    • 2. Does the the company have enough assets to cover their liability
  17. Canadian Generally Accepted Accounting (GAAP)
    Produce financial information to present investors/lenders/creditors in making decisions as capital providers
  18. 2 fundamental characteristic to find financial information useful are?
    • Relevant
    • Faithful representation: Comparable, Verifiable, Timely, Understandable
Card Set:
Accounting Chapter 1
2013-10-02 03:01:41

Chapter 1: Business Decisions and Financial Accounting
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