ACC 101 Exam questions and
answers graded A+
3 Types of business - ANS✅✅Sole Proprietorship, Partnership, Corporation
Sole Proprietorship - ANS✅✅One of the three types of business. It is a business owned by one
person.
Pros: You are in control, simple to establish, tax advantages
Cons: Proprietor is liable, financing may be difficult, Transfer of ownership may be difficult.
Partnership - ANS✅✅One of the three types of business. It is a business owned by two people.
Pros: The two people are completely in control, tax advantages, simple to establish, broader skills
and resources.
Cons: Liable for all business debts/claims, transfer of ownership may be difficult.
Corporation - ANS✅✅One of the three types of business. Company is controlled by people with
the most stock. Public company.
Pros: Easier to finance, lower liability, easier to change ownership
Cons: unfavorable tax treatment
Unlimited vs. Limited Liability - ANS✅✅
Assets - ANS✅✅Resources owned by the entity
Liabilities - ANS✅✅Amounts owed to creditors, obligations of the entity.
Stockholders' Equity - ANS✅✅Common Stock - amount paid in by stockholders for stock.
Retained Earnings - profit retained in the corporation.
Revenue - ANS✅✅Increases in assets resulting from sell of products or services
Expenses - ANS✅✅Costs for use of assets or services in the revenue generating process
, Net Income or Loss - ANS✅✅Revenues less Expenses
Financing Activities - ANS✅✅A business activity. It includes: borrowing money, selling stock,
paying dividends to stockholders...
Affects Liabilities (notes payable), Stockholders' Equity (retained earnings)
Investing Activities - ANS✅✅A business activity. Invest in assets necessary to operate business. Ex:
buying a factory/machinery. Most affects assets, PPE, Investments.
Operating Activities - ANS✅✅A business activity. Use of assets to earn revenue. Costs (expenses)
associated with generating revenue. Most affects: assets, liabilities, expenses, revenue, accounts
receivable/payable.
Balance Sheet Components (Simple) - ANS✅✅Report of a company's assets, liabilities, and
stockholders' equity at a specific point in time. Assets = Liabilities + Stockholders' Equity
Single-Step Income Statement - ANS✅✅Report of net income over a period of time. Revenues -
Expenses = Net Income
Retained Earnings Statement - ANS✅✅Shows amounts of retained earnings through causes and
changes over time. Retained earnings (beg.) + Net Income - Dividends = Retained earnings (end)
Statement of Cash Flow - ANS✅✅Shows info about cash receipts and payments over a period of
time. Cash flow from Operating, Investing, and Financing activities.
Interrelationships of the Financial Statements - ANS✅✅Retained Earnings Statement relies on info
from the Income Statement (Net Income)
Balance Sheet and Retained Earnings are interrelated
Balance Sheet and Statement of Cash Flow are interrelated
Internal Users of Financial Statements - ANS✅✅People who are directly involved inside the
company: Management, Employees, Owners.
answers graded A+
3 Types of business - ANS✅✅Sole Proprietorship, Partnership, Corporation
Sole Proprietorship - ANS✅✅One of the three types of business. It is a business owned by one
person.
Pros: You are in control, simple to establish, tax advantages
Cons: Proprietor is liable, financing may be difficult, Transfer of ownership may be difficult.
Partnership - ANS✅✅One of the three types of business. It is a business owned by two people.
Pros: The two people are completely in control, tax advantages, simple to establish, broader skills
and resources.
Cons: Liable for all business debts/claims, transfer of ownership may be difficult.
Corporation - ANS✅✅One of the three types of business. Company is controlled by people with
the most stock. Public company.
Pros: Easier to finance, lower liability, easier to change ownership
Cons: unfavorable tax treatment
Unlimited vs. Limited Liability - ANS✅✅
Assets - ANS✅✅Resources owned by the entity
Liabilities - ANS✅✅Amounts owed to creditors, obligations of the entity.
Stockholders' Equity - ANS✅✅Common Stock - amount paid in by stockholders for stock.
Retained Earnings - profit retained in the corporation.
Revenue - ANS✅✅Increases in assets resulting from sell of products or services
Expenses - ANS✅✅Costs for use of assets or services in the revenue generating process
, Net Income or Loss - ANS✅✅Revenues less Expenses
Financing Activities - ANS✅✅A business activity. It includes: borrowing money, selling stock,
paying dividends to stockholders...
Affects Liabilities (notes payable), Stockholders' Equity (retained earnings)
Investing Activities - ANS✅✅A business activity. Invest in assets necessary to operate business. Ex:
buying a factory/machinery. Most affects assets, PPE, Investments.
Operating Activities - ANS✅✅A business activity. Use of assets to earn revenue. Costs (expenses)
associated with generating revenue. Most affects: assets, liabilities, expenses, revenue, accounts
receivable/payable.
Balance Sheet Components (Simple) - ANS✅✅Report of a company's assets, liabilities, and
stockholders' equity at a specific point in time. Assets = Liabilities + Stockholders' Equity
Single-Step Income Statement - ANS✅✅Report of net income over a period of time. Revenues -
Expenses = Net Income
Retained Earnings Statement - ANS✅✅Shows amounts of retained earnings through causes and
changes over time. Retained earnings (beg.) + Net Income - Dividends = Retained earnings (end)
Statement of Cash Flow - ANS✅✅Shows info about cash receipts and payments over a period of
time. Cash flow from Operating, Investing, and Financing activities.
Interrelationships of the Financial Statements - ANS✅✅Retained Earnings Statement relies on info
from the Income Statement (Net Income)
Balance Sheet and Retained Earnings are interrelated
Balance Sheet and Statement of Cash Flow are interrelated
Internal Users of Financial Statements - ANS✅✅People who are directly involved inside the
company: Management, Employees, Owners.
