ACCT 2010 EXAM 1 PREPARATION QUESTIONS AND CORRECT ANSWERS

What are financial statements? business documents companies use to report the results of their activities to people and groups Basic financial statements income statement, statement of retained earnings, balance sheet, statement of cash flows What does the word net refer to in accounting an amount after a subtraction What is net income or profit excess of revenues over expenses (rev - expenses= net income) Where do you find net sales? income statement _________ is an information system that measures business activities, processes data into financial statements and reports, and communicates results to decision-makers accounting What is the accounting cycle? the process by which companies produce their financial statements for a specific period _________ is a mechanical part of accounting, just as arithmetic is a part of mathematics; accounting as a field is much more than this mechanical part bookkeeping Who uses accounting information Individuals, investors and creditors, regulatory bodies, nonprofit organizations What two branches of accounting are based on whether the user is external or internal financial accounting (external) and managerial accounting (internal) A ____________ form of business organization consists of a single owner and the owner is personally liable for all the businesses debts proprietorship Income from the ___________ form of business organization flows through to the owners. Each owner can legally bind all partners into unlimited debt partnership