ACCT 207 EXAM 1 CHAPTERS 1-5 ACCURATE STUDY
GUIDE
3 Forms of Business Organization - Answers - Proprietorship, Partnership, Corporation
Internal Users of Financial Statements - Answers - -Human Resources
-Marketing
-Management
-Finance
External Users of Financial Statements - Answers - -Investors
-Creditors
Sarbanes-Oxley Act - Answers - regulation resulting in:
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent activity increased
-Independence of auditors increased
The Accounting Information System - Answers - keeps track of the results of financing,
investing, and operating in a business; the system of collecting, processing transaction
data, and communicating financial information to decision makers; most businesses use
computerized accounting (EDP) systems
Financing - Answers - primary sources of outside funds
-borrowing money
-issuing shares of common stock for cash
Creditors - Answers - party to whom amounts are owed
Dividends - Answers - payment to stockholders
Investing - Answers - Purchasing of resources a company needs to operate → assets
-Cash
-Property, Plant, Equipment
-Investments
Operating - Answers - core business support
-Revenues
-Inventory
-Accounts Receivable
-Expenses
-Liabilities
-Net income
, -Net loss
Revenues - Answers - amounts earned from the sale of products (sales revenue,
service revenue, interest revenue)
Inventory - Answers - Goods available for sale to customers
Accounts Receivable - Answers - amounts owed to us by customers as the result of
sale
Expenses - Answers - cost of assets consumed or services used (cost of goods sold,
selling, marketing, administrative, interest, & income taxes expense)
Liabilities - Answers - In Financing Activities: amount owed; notes payable, bonds
payable
In Operating Activities: arising from expenses include accounts payable, interest
payable, wages payable, sales taxes payable, & income taxes payable
Net Income - Answers - PROFIT; when revenues exceed expenses; number of shares
outstanding
Net Loss - Answers - when expenses exceed revenue
Financial Statements - Answers - -Clarify and provide additional detail
-Essential to understanding a company's operating performance and financial position
-Description of significant accounting policies
-Explanations of uncertainties and contingencies
Four Forms
1) Income Statement
2) Retained Earnings Statement
3) Balance Sheet
4) Statement of Cash Flows
Income Statement - Answers - -Reports results of operations for a specific period of
time → Net income or net loss
-Earnings per share (EPS) are presented at the bottom along with net income
-Amounts received from issued stock are NOT revenues
-Amounts paid out as dividends are NOT expenses
Retained Earnings Statement - Answers - -Net income is needed to determine the
ending balance
-Statement shows amounts and causes of changes during this period (same period as
income statement)
-Users can evaluate dividend payment practices
GUIDE
3 Forms of Business Organization - Answers - Proprietorship, Partnership, Corporation
Internal Users of Financial Statements - Answers - -Human Resources
-Marketing
-Management
-Finance
External Users of Financial Statements - Answers - -Investors
-Creditors
Sarbanes-Oxley Act - Answers - regulation resulting in:
-Top management must now certify the accuracy of financial information
-Penalties for fraudulent activity increased
-Independence of auditors increased
The Accounting Information System - Answers - keeps track of the results of financing,
investing, and operating in a business; the system of collecting, processing transaction
data, and communicating financial information to decision makers; most businesses use
computerized accounting (EDP) systems
Financing - Answers - primary sources of outside funds
-borrowing money
-issuing shares of common stock for cash
Creditors - Answers - party to whom amounts are owed
Dividends - Answers - payment to stockholders
Investing - Answers - Purchasing of resources a company needs to operate → assets
-Cash
-Property, Plant, Equipment
-Investments
Operating - Answers - core business support
-Revenues
-Inventory
-Accounts Receivable
-Expenses
-Liabilities
-Net income
, -Net loss
Revenues - Answers - amounts earned from the sale of products (sales revenue,
service revenue, interest revenue)
Inventory - Answers - Goods available for sale to customers
Accounts Receivable - Answers - amounts owed to us by customers as the result of
sale
Expenses - Answers - cost of assets consumed or services used (cost of goods sold,
selling, marketing, administrative, interest, & income taxes expense)
Liabilities - Answers - In Financing Activities: amount owed; notes payable, bonds
payable
In Operating Activities: arising from expenses include accounts payable, interest
payable, wages payable, sales taxes payable, & income taxes payable
Net Income - Answers - PROFIT; when revenues exceed expenses; number of shares
outstanding
Net Loss - Answers - when expenses exceed revenue
Financial Statements - Answers - -Clarify and provide additional detail
-Essential to understanding a company's operating performance and financial position
-Description of significant accounting policies
-Explanations of uncertainties and contingencies
Four Forms
1) Income Statement
2) Retained Earnings Statement
3) Balance Sheet
4) Statement of Cash Flows
Income Statement - Answers - -Reports results of operations for a specific period of
time → Net income or net loss
-Earnings per share (EPS) are presented at the bottom along with net income
-Amounts received from issued stock are NOT revenues
-Amounts paid out as dividends are NOT expenses
Retained Earnings Statement - Answers - -Net income is needed to determine the
ending balance
-Statement shows amounts and causes of changes during this period (same period as
income statement)
-Users can evaluate dividend payment practices
