Term
Proprietorship
definition and advantages/disadvantages |
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Definition
owned by one individual.
Disadvantage-financial resources available are limited to the individual owners resources all liability is on the owner
Advantage- easy and inexpensive to organize |
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Term
Partnership
definition advantages/disadvantages |
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Definition
owned by two or more individuals
disadvantages-financial resources limited to those of the owners and all liability is on the owners.
Advantages-Easy and can be inexpensive to organize. Generally, more financial resources are available to partnerships than to proprietorships. |
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Term
Corporation
definition advantages/disadvantages |
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Definition
organized under state or federal statutes as a legal entity. owners are stockholders. Advantage- able to obtain large amounts of money by issuing stock. about 20% of of businesses are corporations but they make up 90% of total dollars of business receipts.
Disadvantage-Stockholders may not have the control they desire over
the affairs of the corporation because they may not manage the corporation. |
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Term
Limited liability
defn adv/disadv |
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Definition
organized as a corporation with the option to tax as a partnership. Advantage- liability is limited to amount invested. LLCs can generally raise more financial resources than proprietorships
and partnerships because there is no limit to the number or types of members. Avoids double taxation of corporation.
Disadvantage-LLC terminates when members die (requires careful succession planning) |
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Term
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Definition
strive to be cheapest
wal-mart, southwest |
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Term
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Definition
strive to be unique or best so they can charge more.
Tommy Hilfiger, BMW, John Deere. |
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Term
| Capital Market Stakeholders |
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Definition
Providers of the major financing for the business
Banks, owners, stockholders |
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Term
| Product or service market stakeholders |
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Definition
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Term
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Definition
collect taxes and fees from the business and its employers.
Federal state and city governments |
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Term
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Definition
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Term
Financing activities.
defn
what is listed under FA on SCF |
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Definition
involve obtaining funds to begin and operate a business. Cash receipts from financing activities including debt such as issuing stock, borrowing money, bonds.
(Dividends paid to stockholders), (Repurchase of stock) (bond redemptions) (treasury stock) |
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Term
Investing activities
defn
what is listed as IA on SCF |
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Definition
obtaining the necessary assets to start and and operate the business.
(Property, plant and equipment) Cash received from the sale of long term assets such as property plant and equipment. |
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Term
What are the three types of businesses?
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Definition
| Manufacturing, Merchandising, Service |
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Term
What are the four organizational forms of businesses?
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Definition
| Proprietorship, partnership, corporation, Limited Liability Company (LLC) |
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Term
| What are the two business emphases? (strategies) |
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Definition
| Low-cost and Premium-price |
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Term
| What are the business stakeholders? |
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Definition
| Capital market stakeholders, product or service market stakeholders, government stakeholders, internal stakeholders |
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Term
| What are the three primary business activities? |
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Definition
| Investing activities, Operating activities, Financing activities. |
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Term
Operating activities
defn
what is an OA on SCF |
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Definition
| Cash receipts from customers, (cash paid out for expenses) |
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Term
| What is the overall accounting equation? |
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Definition
| Assets=Liability + Stockholder's Equity |
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Term
| What are assets? give examples of all that would show up on BS. are they long term or short term? |
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Definition
Assets- resources owned by a business.
Short-term assets- Cash, Accounts Receivable, Short term investments, (debt & equity), Prepaid expenses (Prepaid insurance & supplies), Inventory (Raw materials, Work in process, Finished goods)
Long-Term Assets- Property plant and Equipment (Equipment and Machinery, Vehicles, Building, and Land), L/T investments, Intangible assets (Patents, trademarks, copyrights, goodwill) |
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Term
| What are liabilities? What will show up on the BS? Short Term or long term. |
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Definition
Legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
Short term- A/P, Accrued liabilities,Wages Payable, Dividends payable, Short term notes payable, Income taxes payable, Unearned rent and revenues.
Long term- Long term notes payable, bonds payable, contingent liabilities, other non current liabilities. |
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Term
| What is stockholders equity? what shows up on BS? |
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Definition
| The right's of stockholders. Capital stock, retained earnings. |
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Term
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Definition
| on the balance sheet. Distributions of assets to shareholders, decreases Retained earnings. |
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Term
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Definition
| on the income statement. increase in assets from selling products or services. revenues received from selling products is called sales, from services, fees. |
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Term
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Definition
| on the income statement. costs such as wages of employees, salaries of managers, rent, insurance, advertising, freight, and utilities. selling and administrative expenses. cost of goods sold, operating expenses, interest, supplies, income taxes, just any expense. |
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Term
| What is GAAP and what is its purpose? |
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Definition
| Generally accepted accounting principles. determine the proper content of financial statements. necessary so that stakeholders can compare the financial condition and operating results across companies and across time. |
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Term
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Definition
| applies accounting to a specific entity for which stakeholders need economic data. Personal transactions of owners are kept separate from the business. |
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Term
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Definition
| Assets/services are recorded at actual historical cost. Land worth 800,000 is recorded at its original purchase price of 220,000. |
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Term
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Definition
| Assume that a business will continue forever |
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Term
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Definition
| Expenses matched against revenues in same accounting period. Monthly utility costs are reported as expenses along with monthly revenues. |
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Term
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Definition
| requires that entries in the accounting records and the data reported on financial statements be based on objective evidence. If this concept was ignored, the confidence of users in the financial statements could not be maintained. |
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Term
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Definition
| This concept justifies recording only transactions that are expressed in dollars. |
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Term
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Definition
| Financial statements, including related footnotes and other disclosures, should contain all relevant data a reader needs to understand the financial condition and performance of a business. Changes in the use of accounting methods from one period to the next are described in the notes to the financial statements. material litigation involving the corporation is described in a footnote. |
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Term
| What is FOB shipping point? |
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Definition
| the buyer owns the product at the time of shipping therefore pays back the seller for shipping. |
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Term
| What is FOB destination point? |
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Definition
| The seller owns the product at the time of shipping therefore pays the shipping costs |
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Term
| Accounting period Concept |
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Definition
| the changes in financial condition are reported at end of the month |
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Term
| Vertical Analysis of income statement |
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Definition
everything is in a percent of net sales
shows how things measure up to net sales and compare to the other years |
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Term
| horizontal analysis of income statement |
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Definition
new-old over old
shows the change from year to year |
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Term
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Definition
| money is received but not earned |
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Term
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Definition
| money is spent but not recorded as expense yet |
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Term
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Definition
| money that has been earned but not been received |
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Term
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Definition
| expense has been earned but cash has not been spent |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| = GP- Selling expenses-admin expenses |
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Term
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Definition
| Income from operations- other income and expense |
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Term
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Definition
| Income before taxes- taxes |
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Term
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Definition
| 2 percent discount if paid within 10 days, no discount if paid by end of month |
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