Accounting 201 Study Guide 1

Front 1

What are six key things that distinguish a corporation from other forms of business

Back 1

1. One owner is allowed in a corporation

2. A business is taxed as its own separate entity from the owner 3. A corporation has limited liability

4. A corporation is its own separate business entity

5. A corporation has its own legal entity

6. A corporation can have unlimited life

Front 2

What is a corporation?

Back 2

A business legally separate from its owner or owners, meaning it is responsible for its own acts and its own debts. Separate legal status means that a corporation can conduct business with the rights, duties, and responsibilities of a person

Front 3

What are the accounting principles of accounting assumptions and who made them?

Back 3

Measurement / cost principle , full disclosure principle, Revenue recognition, expense recognition / matching principal , the going concern assumption , monetary unit, time period, and business entity. And gaap / generally accepted accounting principles made them.

Front 4

What are two constraints?

Back 4

Materiality and benefits > cost

Front 5

What is the focus of financial accounting and for whom?

Back 5

Financial accounting is the area of accounting aimed at serving external users by providing them with general purpose financial statements

Front 6

What is the cost principal / measurement principle?

Back 6

Prescribes that accounting information is based on actual cost

Front 7

What is the matching principle / expense recognition?

Back 7

Prescribes that a company record the expenses incurred to generate the revenue reported

Front 8

What's the accounting equation?

Back 8

Assets = liabilities + common stock - dividends + Revenue - expenses

Front 9

What are three functions of an accounting system?

Back 9

Identify , record , and communicate

Front 10

What are the four statements?

Back 10

1. income statement

2. Statement of retained earnings

3. Balance sheet

4. Statement of cash flows

Front 11

What is in the heading of a financial statement?

Back 11

First , the name of the company, then under that the name of the statement, then underneath that the date or time period.

Front 12

What's the return on assets ratio?

Back 12

Return on assets = net income ÷ average total assets

Front 13

What is the chart of accounts?

Back 13

A list of all ledger accounts and includes an identification number assigned to each account

Front 14

What's the debt ratio?

Back 14

Debt ratio = total liabilities ÷ total assets

Front 15

What is a classified balance sheet and what does it contain?

Back 15

A balance sheet that organizes assets and liabilities into important subgroups that provide more information to decision-makers and contains current assets, long term investments, plant assets, intangible assets, current liabilities, long-term liabilities, and equity.

Front 16

Accrual basis vs. Cash basis accounting?

Back 16

Accrual accounting uses the adjusting process to recognize revenues and expenses when incurred but Cash basis accounting recognizes revenues when cash is received and record expenses when cash is paid.

Front 17

What is the profit margin ratio?

Back 17

Profit margin = net income ÷ net sales

Front 18

What is the current ratio?

Back 18

Current ratio = current assets ÷ current liabilities

Front 19

What are the elements of a multi-step income statement?

Back 19

The three main parts are Gross profit , income from operations , and net income

Front 20

What is the order of a multi-step income statement?

Back 20

Sales- sales discounts and sales returns and allowances = net sales - cost of goods sold = gross profit - operating expenses = income from operations- other expenses + other revenues = net income

Front 21

Sometimes in a multi-step income statement operating expenses are divided into what two categories?

Back 21

Selling expenses and general and administrative expenses

Front 22

What is the acid test ratio?

Back 22

Acid test = cash and cash equivalents + short-term Investments + current receivables ÷ current liabilities

Front 23

What is the gross margin ratio?

Back 23

Gross margin ratio = net sales - cost of goods sold ÷ net sales