Shared Flashcard Set

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Chapter 1
Intro to financialstatements
24
Accounting
07/10/2008

Additional Accounting Flashcards

 


 

Cards

Term
Sole Proprietorship
Definition
  • Business owned by one person
  • simple to esstablish
  • owner  controled
  • tax advantages
    • any income from the company goes on your personal income
    • you get tax breaks on you car or car ect.
  • owner personally liable
    • anything bad that happens becasude of the company,  you are held personally liable
  • financing dificult
Term
Partnership
Definition
  • Two or more owners
  • simple to establish
  • shared control
  • broader skills and resources
    • the other partner can have knowledge that one lacks
  • tax advantages
  • personally liable
Term
Corporation
Definition
  • Seperate legal entity owned by stockholders
  • Easy to transfer owneship
  • greater capital raising potential
  • lower legal liablity
    • no one person is blamed and the company is better prepared to handle and thing bad that happens
  • unfavorable tax treatment
    • double taxation
      • company is taxed on income and so are theemployees on any money they make from the company
Term

Internal Users

(4 types) 

Definition
  • managers who plan,organize and  run a business
    • marketing managers
      • pricing and sales goals
    • production supervisors
      • volume, wage rates and cost control
    • finance directors
      • dividend policy, debt and equity
    • company officers
      • long-term growth, performance measurement and overall vision
Term

External Users

(3 types) 

Definition
  • Investors: use the infmoration to buy,holdor sell  stock
  • Creditors: use information to evaluate risks of granting credit or lending money
  • others
    • regulatory agencies: determine if a company it complying with the laws
    • tax authorities
    • customers: check that the company you get supplies from are going to stay around from the term of your contract with them
    • labor unions: they want to see proof of why the company acting as it is
    • economic planners: figure out how the rise and fall of certain businesses will affect others 
Term

Financing Activities

(2 types) 

Definition
  • Debt financing
    • borrowing creates liabilities
      • back loans
      • debt securities
      • goods on credit or payables
  • equity financing
    • selling stock creates stockholders' equity (owner's equity)
Term
Creditors
Definition
people to whom  the company owes money to
Term
Liabilities
Definition
The amount that is owed to creditors in the form of debt and other obligations
Term
Notes Payable
Definition
An amount owed to a bank for money that is borrowed.  It is a type of liablity
Term
bonds payable
Definition
debt securities sold to investors that must be repaid at a particular date some years in the future
Term
Common stock
Definition
a way for a company to earn funds by selling shares of stock to investors 
Term
Dividends
Definition
payment to stockholders
Term
Investing Activities
Definition
Anything that you put time/money/effort into that you hope to grow in the long term by buying and selling long term assets
  • obtaning resources or assets to opperate the business
    • such as land, buildings, vehicles, computers, furniture and equipment 
Term
Assets
Definition
Resources owned by a business
  • Property, plant and equipment
  • cash
    • one of the more important assets
  • investments 
Term
Operating Activities
Definition
The day to day stuff
  • selling goods
  • providing services
  • manufacturing
  • cost of sales
  • advertising
  • payment of employees
  • paying utilities 
Term
Revenue
Definition
the amount earned from the sale of products.  This therefore increases assets
 
  • EX: intrest revenue, sales revenue, service revenue 
Term
Inventory
Definition
goods available for future salesto customers
Term
account recievable
Definition
the right to recieve money in the future
Term
Expenses
Definition
The cost of assets consumed  or services used to generate revenue
  •  EX: cost of goods sold,  selling expenses, marketing expenses, administrative expenses,intrest expenses, income taxes 
Term

Accounts payable

(other examples) 

Definition
the obligation to pay for goods whichhave  been purchased on credit from suppliers
  • other examples: intrest payable, wages payable, sales taxes payable, property taxes payable, income taxes payable 
Term

net income

(equation) 

Definition

When revenues exceed expenses

Revenue - Expenses = Net income 

Term
net loss
Definition
when expenses exceed revenues
Term
Income statement
Definition
Shows how successfully your business performed during a period of time
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Term
Definition