ACCT 2401 Test 1 Study Guide | Accounting Review, Key Concepts & Practice
Questions
For-Profit Business - ANS ✔✔attempts to create an exchange, or sale, where revenue exceeds
expenses, creating a profit.
Not-For-Profit Business - ANS ✔✔attempts to create an exchange or sale where revenue equals
cost.
Service Business - ANS ✔✔sells a service to its customers.
Merchandising Business - ANS ✔✔sells physical goods or products to its customers
Manufacturing Business - ANS ✔✔produces the physical good that it sells to its physical
customers
Sole Proprietorship - ANS ✔✔A business entity that has one owner, where, for legal and tax
purposes, the business and the owner are considered the same. Liability to owners and hard to
raise capital.
Partnership - ANS ✔✔A business entity that has more than one owner, where, for legal and tax
purposes, the business and the owners are considered the same. Limited life and shared
investment
Corporation - ANS ✔✔A legal entity, chartered under state law, empowered to conduct
business; the corporation and the owners are considered separate for legal and tax purposes.
Gets double taxation
Stockholders - ANS ✔✔An owner of part of a corporation
, Dividends - ANS ✔✔The payment of past and current profits, less losses, previously retained in
the business.
S-Corporation - ANS ✔✔A small corporation that has met the legal requirements to act as a
corporation but elected to be taxed at individual rates. Limited liability of owners, Unlimited life,
no double tax, easier to raise capital. More regulations.
Limited liability company - ANS ✔✔A hybrid business entity having characteristics of both a
corporation and a partnership. No double taxation, limited liability to owners, and more flexible
than a s- corp. Difficult to form and cost more.
Financial accounting - ANS ✔✔The process of recognizing, measuring, recording information
about a business's transaction to stakeholders outside of the business, including stockholders
(owners) and lenders.
Generally accepted accounting principles (GAAP) - ANS ✔✔The rules, principles, and concepts
established by the accounting profession that govern financial accounting. USA only.
Financial accounting standards board (FASB) - ANS ✔✔A seven-person group primarily
responsible for the establishment of standards of financial accounting and reporting called
GAAP.
International financial accounting standards (IFRS) - ANS ✔✔Standards developed by the IASB
for use throughout the world
The business entity principle - ANS ✔✔Dictates that the financial affairs of a business
organization must be kept separate from the personal financial affairs of the business owners.
Questions
For-Profit Business - ANS ✔✔attempts to create an exchange, or sale, where revenue exceeds
expenses, creating a profit.
Not-For-Profit Business - ANS ✔✔attempts to create an exchange or sale where revenue equals
cost.
Service Business - ANS ✔✔sells a service to its customers.
Merchandising Business - ANS ✔✔sells physical goods or products to its customers
Manufacturing Business - ANS ✔✔produces the physical good that it sells to its physical
customers
Sole Proprietorship - ANS ✔✔A business entity that has one owner, where, for legal and tax
purposes, the business and the owner are considered the same. Liability to owners and hard to
raise capital.
Partnership - ANS ✔✔A business entity that has more than one owner, where, for legal and tax
purposes, the business and the owners are considered the same. Limited life and shared
investment
Corporation - ANS ✔✔A legal entity, chartered under state law, empowered to conduct
business; the corporation and the owners are considered separate for legal and tax purposes.
Gets double taxation
Stockholders - ANS ✔✔An owner of part of a corporation
, Dividends - ANS ✔✔The payment of past and current profits, less losses, previously retained in
the business.
S-Corporation - ANS ✔✔A small corporation that has met the legal requirements to act as a
corporation but elected to be taxed at individual rates. Limited liability of owners, Unlimited life,
no double tax, easier to raise capital. More regulations.
Limited liability company - ANS ✔✔A hybrid business entity having characteristics of both a
corporation and a partnership. No double taxation, limited liability to owners, and more flexible
than a s- corp. Difficult to form and cost more.
Financial accounting - ANS ✔✔The process of recognizing, measuring, recording information
about a business's transaction to stakeholders outside of the business, including stockholders
(owners) and lenders.
Generally accepted accounting principles (GAAP) - ANS ✔✔The rules, principles, and concepts
established by the accounting profession that govern financial accounting. USA only.
Financial accounting standards board (FASB) - ANS ✔✔A seven-person group primarily
responsible for the establishment of standards of financial accounting and reporting called
GAAP.
International financial accounting standards (IFRS) - ANS ✔✔Standards developed by the IASB
for use throughout the world
The business entity principle - ANS ✔✔Dictates that the financial affairs of a business
organization must be kept separate from the personal financial affairs of the business owners.
