Chapter 1: Business Decisions and Financial Accounting

__________ is a type of business ran by one person who is liable for all debts of the business. No legal maneuvers are necessary.

A(n) __________ is a type of business owned by 2 individuals who are both liable for the debts of their business. Easiest business to start, no lawyer needed to create. The profits or losses are split between the owners

A ___________ is a type of business that is a separate legal entity that is formed by documents filed with a state.

• Income taxes are paid by the corporation and the owners

• Can be a public or private company

In a __________, your stock is readily available to be bought by customers.

In a ___________, your stock is bought and sold privately and are not accessible to the general public.

The first day that stock is available to the general public, aka "going public", is called the ___________.

A company that is a combination of a corporation and a sole proprietorship or a partnership is called a ___________ and you must file with the state to be created.

The three main characteristics of Limited Liability Companies are:

____________ are for internal users and reports on operating activities of a business.

___________ are for external users and create periodic statements.

What are the four types of external users?

___________ activities generate profit and involve short term expenses. They are the simple actions of running a business like buying supplies.

___________ activities are the process of buying and selling long term assets like equipment.

___________ activities are formal actions like borrowing money from a bank and paying loans.

Equation for the basic accounting equation:

The financial reports are assumed to consist only that business's activities.

Resources the company owns and will benefit from in the future Ex: cash, supplies, equipment

What a company owes to creditors Ex: Accounts Payables, Notes Payable

What is owed to the owner of a business. Common stock and Retained Earnings

Equity that is PAID by stockholders to get stock.

Equity EARNED by the company.

The amounts we earn from selling goods or services

Revenues are recorded when __________.

The cost of what is needed to earn revenue.

Expenses are recorded when ___________.

When revenues are greater than expenses, we have ___________.

When expenses are greater than revenue, we have __________.

The equation to calculate Net Income/Loss

___________ are paid to stockholders' as a repayment for their investments towards the company. They are a component of Retained Earnings

The order that financial statements are prepared is:

Financial statements can be prepared:

A ___________ ends on December 31.

A __________ ends on a date that is not December 31.

A heading for a financial statement includes:

The __________ provides information regarding profitability and includes revenues, expenses, and net income/loss

Under this, the appropriate monetary unit should be used for business activities. Ex: the United States uses the American dollar.

In the __________, there is information regarding the effects of the distributions of dividends. Under this statement, you'll see Retained Earnings (beg.), Net Income/Loss, Dividends, and Retained Earnings (end.)

The __________ is a snapshot of a business's resources specific date. Listed under this financial statement are assets, liabilities, and stockholders' equity.

Under the __________, assets are recorded based on what we agreed to pay for them.

The statement that records operating, financing, and investing activities is called the __________. You will also see the reported Change in Cash (shows if a business is making enough money to pay the amounts it owes).

The Income Statement provides the stockholders with what the ________ is.

The Statement of Retained Earnings shows the returns through dividends that are to be ________.

The Balance Sheet allows creditors to see if the business’s assets will ________.

The Statement of Cash Flows shows if a business is making enough money to pay ________.

When external users view statements, they should be:

The Financial Accounting Standards Board (United States)

Generally Accepted Accounting Principles (United States)

International Accounting Standards Board

International Financial Reporting Standard