Forms of Businesses:
Proprietorship & Partnership
• ____________liability
• No ____________ (on the business; the owner, however days pay
... [Show More] taxes)
Corporation (Shareholders -> Board of Directors -> Top Managers)
• ____________ liability
• Taxation (corporations pay taxes, shareholders pay taxes on earnings)
• Can be ____________ traded or ____________ held. correct answer: unlimited, taxation, limited, publicly, privately
Assumption that we treat the business and the owners as separate entities, focusing on the accounting for the businesses, not the owners. correct answer: separate entity
the currency in which the company is operating correct answer: unit of measurement
We presume that the company will continue to operate -- that it'll be ongoing correct answer: going concern
We presume that we can arbitrarily pick any time period that we want to and report the financial results for that time period correct answer: periodicity
Assumption that the only information that needs to be disclosed in financial statements is information that will be useful for those who rely on the financial statements to make decisions correct answer: materiality
Users of Financial Reports
• ________________ (stockholders)
• ________________ (banks)
• ________________ ________________ (SEC)
• ________________ ________________
• ________________ ________________ correct answer: investors, creditors, government agencies, company management, financial analysts
_____________ _____________ _____________ _____________(GAAP)
• _____________ & _____________ _____________ (SEC):The rule-making resides under the authority of the SEC.
• _____________ _____________ _____________ _____________(FASB): consists of representatives from public accounting firms, industry, government agencies, and academia.
_____________ _____________ _____________ _____________(IFRS) correct answer: Generally Accepted Accounting Principles, Securities & Exchange Commission, Financial Accounting Standards Board, International Financial Reporting Standards
Qualities of Financial Statements
• _______________________
• _______________________
• _______________________ _______________________
• _______________________
• _______________________
• _______________________ _______________________ correct answer: understandability, timeliness, full disclosure, comparability, objectivity, decision relevance
Measures financial position at a point in time. correct answer: Balance Sheet
Accounting Equation.
• The left side of the equation represents ________________ of the company, that is the ________________ are the resources.
• The right side represents sources of the ________________ provided by the ________________ . The ________________ represent the creditor's claims.
• ________________ ________________ represents the sources provided by the ________________ and the owner's claims. correct answer: resources, assets, funding, creditors, liabilities, owner's equity, owners
Accounting Equation:
_______________ = ________________ + __________________ correct answer: Assets, Liabilities, Owner's Equity
Resources owned or rights to receive resources correct answer: assets
Assets
• ________________ (cash, buildings, inventory, equipment)
• ________________ (copyrights, patents, or trademarks)
• ________________ ________________ (e.g. legal right to receive payment) correct answer: physical, intangible, legal rights
The order of presentation for assets is determined by: correct answer: liquidity
Assets Valuation:
• _______________ cost
• _______________ value [Show Less]