Accounting 2010 Ch. 1 Exam Review
Questions and Answers
Accounting
-What type of system
-Measures what?
-Does What (3)? - ANSWER-An information system; Measures business activities,
processes data into reports, and communicates results to decision makers
Who uses Accounting Information? (4) Why? - ANSWER-1. Individuals- manage
personal bank accts, decide to rent or buy, budget monthly income and expenditures
2. Investors and Creditors
* Investors- want to know how much they can earn on an investment
Creditors- want to know when they are going to be paid*
3. Regulatory Bodies-
-IRS- requires businesses, individuals, and other organizations to pay taxes
-U.S. Securities and Exchange Commission (SEC)- requires public companies to
provide financial reports
4. Nonprofit Organizations- Files periodic reports with IRS and state govs.
General Partnership - ANSWER-Have *mutual agency and unlimited liability* (means
that one partner can conduct business in the name of the entity and can make
agreements that legally bind all partners w/o limit for the partnership's debts.)
LLP (Limited Liability Partnership)
-Debts:
-Must have one what? - ANSWER-Partnership entity in which one partner cannot create
a large liability for the other partners.
-Debts: Each partner is liable for partnership debts only up to the extent of his/her's
investment in the partnership and proportionate share of the liabilities.
-LLP MUST have one general partner with unlimited liability for all partnership debts
Limited Liability Company (LLC)
-Owners ("Members") have what?
-Income does what?
-Taxes? - ANSWER-- A business organization in which the business (not the owner) is
liable for the company's debts
-Members have limited liability
-LLC's income "flows through" to the members, just as if they were partners
, -LLC pays NO BUSINESS INCOME TAX → Members pay income tax at their own tax
rates (same as if partners)
Corporations- Owners? What type of entity? - ANSWER-A business owned by
stockholders. A corporation is a LEGAL ENTITY, an "artificial person" in the eyes of the
law ( has the same rights as a human being)
Corporations:
-Formed under what?
-Legally what?
-Raises money by doing what?
-Debts?
-Taxes?
-Corporation is controlled by who? - ANSWER--Formed under state law
-Legally distinct from its owners
-Able to raise large sums of capital from issuance (issuing) stock
-Debts: Stockholders have NO personal obligation from the corp's debts → Limited
liability
-Taxes- Double Taxation of Distributed Profits: Corporation pays a business income tax
and the shareholders of a corp are taxed on distribution received from the corporation
(dividends)
► Corporation pays income tax
► Shareholders taxed on dividend distributions
-Ultimately controlled by stockholders through voting
Stockholders (Shareholder) - ANSWER-A person who owns stock in a corporation
-Usually get one vote for each share owned
Stock - ANSWER-Shares into which the owners' equity of a corporation is divided
Board of Directors - ANSWER-Group elected by stockholders to set policy for a
corporation and to appoint its officers.
CEO (Chief Executive Officer) - ANSWER-Holds most power in a corporation
Accountants follow professional frameworks for measurement and disclosure of
financial information: (4) - ANSWER-GAAP, FASB, IASB, IFRS
GAAP (Generally Accepted Accounting Principles)- Define - ANSWER-Accounting
guidelines that govern how accounting is practiced
Financial Accounting Standards Board (FASB) formulate what? - ANSWER-formulates
GAAP
International Accounting Standards Board (IASB)- Formulate what? - ANSWER-Sets
International Financial Reporting Standards (IFRS)
Questions and Answers
Accounting
-What type of system
-Measures what?
-Does What (3)? - ANSWER-An information system; Measures business activities,
processes data into reports, and communicates results to decision makers
Who uses Accounting Information? (4) Why? - ANSWER-1. Individuals- manage
personal bank accts, decide to rent or buy, budget monthly income and expenditures
2. Investors and Creditors
* Investors- want to know how much they can earn on an investment
Creditors- want to know when they are going to be paid*
3. Regulatory Bodies-
-IRS- requires businesses, individuals, and other organizations to pay taxes
-U.S. Securities and Exchange Commission (SEC)- requires public companies to
provide financial reports
4. Nonprofit Organizations- Files periodic reports with IRS and state govs.
General Partnership - ANSWER-Have *mutual agency and unlimited liability* (means
that one partner can conduct business in the name of the entity and can make
agreements that legally bind all partners w/o limit for the partnership's debts.)
LLP (Limited Liability Partnership)
-Debts:
-Must have one what? - ANSWER-Partnership entity in which one partner cannot create
a large liability for the other partners.
-Debts: Each partner is liable for partnership debts only up to the extent of his/her's
investment in the partnership and proportionate share of the liabilities.
-LLP MUST have one general partner with unlimited liability for all partnership debts
Limited Liability Company (LLC)
-Owners ("Members") have what?
-Income does what?
-Taxes? - ANSWER-- A business organization in which the business (not the owner) is
liable for the company's debts
-Members have limited liability
-LLC's income "flows through" to the members, just as if they were partners
, -LLC pays NO BUSINESS INCOME TAX → Members pay income tax at their own tax
rates (same as if partners)
Corporations- Owners? What type of entity? - ANSWER-A business owned by
stockholders. A corporation is a LEGAL ENTITY, an "artificial person" in the eyes of the
law ( has the same rights as a human being)
Corporations:
-Formed under what?
-Legally what?
-Raises money by doing what?
-Debts?
-Taxes?
-Corporation is controlled by who? - ANSWER--Formed under state law
-Legally distinct from its owners
-Able to raise large sums of capital from issuance (issuing) stock
-Debts: Stockholders have NO personal obligation from the corp's debts → Limited
liability
-Taxes- Double Taxation of Distributed Profits: Corporation pays a business income tax
and the shareholders of a corp are taxed on distribution received from the corporation
(dividends)
► Corporation pays income tax
► Shareholders taxed on dividend distributions
-Ultimately controlled by stockholders through voting
Stockholders (Shareholder) - ANSWER-A person who owns stock in a corporation
-Usually get one vote for each share owned
Stock - ANSWER-Shares into which the owners' equity of a corporation is divided
Board of Directors - ANSWER-Group elected by stockholders to set policy for a
corporation and to appoint its officers.
CEO (Chief Executive Officer) - ANSWER-Holds most power in a corporation
Accountants follow professional frameworks for measurement and disclosure of
financial information: (4) - ANSWER-GAAP, FASB, IASB, IFRS
GAAP (Generally Accepted Accounting Principles)- Define - ANSWER-Accounting
guidelines that govern how accounting is practiced
Financial Accounting Standards Board (FASB) formulate what? - ANSWER-formulates
GAAP
International Accounting Standards Board (IASB)- Formulate what? - ANSWER-Sets
International Financial Reporting Standards (IFRS)
