2013 - Acct 2101 Chapter 1

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BUSINESS

Back 1

All activities necessary to provide the members of an economic system with good or services.

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WHOLESALERS

Back 2

Companies that distribute goods to retail outlets.

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RETAILERS

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Companies that sell goods to consumers.

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BUSINESS ENTITIES

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Organized to earn a profit; consists of three types.

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SOLE PROPRIETOR

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A form of organization operated to earn a profit,

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ECONOMIC ENTITY CONCEPT

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The assumption that a single, identifiable unit must be accounted for in all situations.

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TRUE

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TRUE OR FALSE: A sole proprietor is not a taxable entity.

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PARTNERSHIP

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A business owned by two or more individuals.

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TRUE

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Corporations control an overwhelming majority of the private resources in the US.

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CORPORATION

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An entity organized under the laws of a particular state..

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SHARE OF STOCK

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A certificate that acts as evidence of ownership in a corporation.

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BOND

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A certificate that represents a corporation's promise to repay a certain amount of money and interest in the future.

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TWO ADVANTAGES OF INCORPORATION

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The ability to raise large amounts of money in a relatively brief period of time, and the ease of ownership in a corporation.

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NONBUSINESS ENTITY

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An organization operated for some purpose other than to earn a profit.

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LIABILITY

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An obligation to a business

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NOTE PAYABLE

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When a company borrows money at a bank, this liability is known as... (8)

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BONDS PAYABLE

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When a company sells a bond, the obligation is termed as... (8)

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TAXES PAYABLE

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Amounts owed to the government for taxes is called... (8)

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CAPITAL STOCK

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Indicates the owners' contributions to a corporation. (9)

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STOCKHOLDER

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Someone providing a permanent form of financing to a business; one of the owners of a corporation. (9)

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CREDITOR

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Does not provide a permanent form of financing to a company; someone to whom a company or person has a debt.

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ASSET

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A future economical benefit to a business.

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REVENUE

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An inflow of assets resulting from the sale of goods and services.

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EXPENSE

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An outflow of assets resulting from the sale of goods and services.

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ACCOUNTING

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Process of identifying, measuring, and communicating economic information to various users.

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MANAGEMENT ACCOUNTING

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Branch of accounting concerned with providing management with information to facilitate planning with control.

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FINANCIAL ACCOUNTING

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Branch of accounting concerned with the preparation of financial statements for outsider use.

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THE ACCOUNTING EQUATION

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ASSETS = LIABILITIES + OWNER'S EQUITY

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LEFT SIDE OF THE ACCOUNTING EQUATION

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Assets; items valuable economic resources and will provide future benefits for company.

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RIGHT SIDE OF THE ACCOUNTING EQUATION

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Indicates who provided the assets

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OWNER'S EQUITY

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The owner's claim on the assets of an entity.

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STOCKHOLDER'S EQUITY

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The mathematical difference between a corporations's assets and its obligations or liabilities.

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RETAINED EARNINGS

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Part of owner's equity that represents the income earned less dividends paid over the life of an entity.

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BALANCE SHEET

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The financial statement that summarizes the assets, liabilities, and owner's equity at a specific point in time.

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INCOME STATEMENT

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A statement that summarizes revenues and expenses.

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NET INCOME

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The excess of revenue over expenses.

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DIVIDENDS

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A distribution of the net income of a business to its own.

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STATEMENT OF RETAINED EARNINGS

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Statement that summarizes the income earned and dividends paid over the life of business.

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STATEMENT OF CASH FLOWS

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The financial statement that summarizes a company's cash receipts and cash payments during the period from operating, investing, and financial activities.

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COST PRINCIPLE

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Assets are recorded at the cost to acquire them.

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GOING CONCERN

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The assumption that an entity is not in the process of liquidation and that it will continue indefinitely.

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MONETARY UNIT

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The yardstick used to measure amounts in financial statements; the dollar in the US.

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TIME PERIOD ASSUMPTION

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An artificial segment on the calendar used as the basis for preparing financial statments.

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GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

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The various methods, rules, practices and other procedures that have evolved over time in response to the need to regulate the preparation of financial statement.

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SECURITIES AND EXCHANGE COMMISSION

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The federal agency with the ultimate authority to determine the rules for preparing statements for companies whose stock is sold to the public.

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FINANCIAL ACCOUNTING STANDARDS BOARD

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The group in the private sector with authority to set accounting standards.

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AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

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The professional organization of certified public accountants.

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CPA

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Designation for an individual who has passed a uniform exam administered by the AICPA and has met other requirements as determined by individual states.

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PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

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A five-member body created by an act of Congress in 2002 to set auditing standards.

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INTERNATIONAL ACCOUNTING STANDARDS BOARD.

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The organization formed to develop worldwide accounting standards.