ACC 200 EXAM 1 (CHAPTER 1, 2, 3) QUESTIONS WITH
VERIFIED ANSWERS
Sole Proprietorship - Answers - Owned by one person. Simple to set up. Owner
maintains control. Owners are liable for business debts because it is not a separate
legal entity.
Partnerhsip - Answers - Two more more people decide to go into business together.
Often formed when one person doesn't have the economic resources to start business
alone or a person with unique skills is needed. More favorable tax treatment. Owners
are personally liable for business debts because not a separate legal entiity.
Corporation - Answers - Separate legal entity. Owned by stockholders. Investors give
the business cash or other property in exchange for shares of stock. Easier to raise
funds because shares are easier to sell and investors can invest with small amounts of
money. Less favorable tax treatment. Owners are not personally liable for debts.
Accounting - Answers - The information system that identifies, records, and
communicates the economic events of an organization to interested users.
Internal and External - Answers - Two types of users
Internal Users - Answers - Managers who plan, organize, and run the business. Must
answer important questions. Use both internal and financial statements.
External Users - Answers - Investors (owners), Creditors (debtors like banks and
suppliers), Various others (taxing authorities, customers, labor unions, and regulatory
agencies)
Financial Statements - Answers - Primary means of communicating with users?
Income statement, Retained Earnings Statement, Balance Sheet, Statement of Cash
Flows - Answers - Four Financial Statements?
Income Statement - Answers - Reports revenues and expenses for time period.
Indicates how successfully the business performed during the period.
Retained Earnings Statement - Answers - indicates how much of previous income was
distributed to you and the other owners of your business in the form of dividends, and
how much was retained in the business to allow for future growth.
The Balance Sheet - Answers - Reports what a company owns and what it owes at a
point in time.
, Asset - Answers - Anything a company owns
Liability - Answers - Anything a company owes
Net Income - Answers - Revenues - Expenses where Revenue > Expenses
Net Loss - Answers - Revenues - Expenses where Revenue < Expenses
What is the formula to calculate Retained Earnings? - Answers - Beginning Retained
Earnings + Net Income - Dividends
What is the basic Accounting Equation? - Answers - Assets = Liabilities + Stockholders'
Equity
Management Discussion and Analysis - Answers - Written by management and
discusses their views and ability to pay near-term debt, ability to fund operations and
growth, and results of operations.Subject because of projecting future events.
Notes - Answers - Clarify financial statements and provide additional detail. Need not be
quantifiable in nature.
Author's Report - Answers - Prepared by independent outside auditor. States auditor's
opinion f the fairness of the presentation of the financial position and results of
operatuons and their conformance with GAAP.
Current Assets, Long-term investments, Property, plant, and equipment, Intangible
assets - Answers - Classifications of Assets?
Current liabilities, Long-term liabilities, Stockholders' equity - Answers - Classifications
of liabilities?
Current Asset - Answers - Assets that a company expects to convert to cash or use
within one year or the operating cycle, whichever is longer.
Order of liquidity - Answers - How are assets listed?
Liquidity - Answers - To be listed in the order in which they are expected to be
converted to cash.
Long Term Investments - Answers - Investments in stocks and bonds of other
companies that are held for more than one year or assets such as land or buildings not
being used for operating activities.
VERIFIED ANSWERS
Sole Proprietorship - Answers - Owned by one person. Simple to set up. Owner
maintains control. Owners are liable for business debts because it is not a separate
legal entity.
Partnerhsip - Answers - Two more more people decide to go into business together.
Often formed when one person doesn't have the economic resources to start business
alone or a person with unique skills is needed. More favorable tax treatment. Owners
are personally liable for business debts because not a separate legal entiity.
Corporation - Answers - Separate legal entity. Owned by stockholders. Investors give
the business cash or other property in exchange for shares of stock. Easier to raise
funds because shares are easier to sell and investors can invest with small amounts of
money. Less favorable tax treatment. Owners are not personally liable for debts.
Accounting - Answers - The information system that identifies, records, and
communicates the economic events of an organization to interested users.
Internal and External - Answers - Two types of users
Internal Users - Answers - Managers who plan, organize, and run the business. Must
answer important questions. Use both internal and financial statements.
External Users - Answers - Investors (owners), Creditors (debtors like banks and
suppliers), Various others (taxing authorities, customers, labor unions, and regulatory
agencies)
Financial Statements - Answers - Primary means of communicating with users?
Income statement, Retained Earnings Statement, Balance Sheet, Statement of Cash
Flows - Answers - Four Financial Statements?
Income Statement - Answers - Reports revenues and expenses for time period.
Indicates how successfully the business performed during the period.
Retained Earnings Statement - Answers - indicates how much of previous income was
distributed to you and the other owners of your business in the form of dividends, and
how much was retained in the business to allow for future growth.
The Balance Sheet - Answers - Reports what a company owns and what it owes at a
point in time.
, Asset - Answers - Anything a company owns
Liability - Answers - Anything a company owes
Net Income - Answers - Revenues - Expenses where Revenue > Expenses
Net Loss - Answers - Revenues - Expenses where Revenue < Expenses
What is the formula to calculate Retained Earnings? - Answers - Beginning Retained
Earnings + Net Income - Dividends
What is the basic Accounting Equation? - Answers - Assets = Liabilities + Stockholders'
Equity
Management Discussion and Analysis - Answers - Written by management and
discusses their views and ability to pay near-term debt, ability to fund operations and
growth, and results of operations.Subject because of projecting future events.
Notes - Answers - Clarify financial statements and provide additional detail. Need not be
quantifiable in nature.
Author's Report - Answers - Prepared by independent outside auditor. States auditor's
opinion f the fairness of the presentation of the financial position and results of
operatuons and their conformance with GAAP.
Current Assets, Long-term investments, Property, plant, and equipment, Intangible
assets - Answers - Classifications of Assets?
Current liabilities, Long-term liabilities, Stockholders' equity - Answers - Classifications
of liabilities?
Current Asset - Answers - Assets that a company expects to convert to cash or use
within one year or the operating cycle, whichever is longer.
Order of liquidity - Answers - How are assets listed?
Liquidity - Answers - To be listed in the order in which they are expected to be
converted to cash.
Long Term Investments - Answers - Investments in stocks and bonds of other
companies that are held for more than one year or assets such as land or buildings not
being used for operating activities.
