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