ACC 231 Exam 1 ASU Wolfe Question
and answers already passed
2025/2026
Business - correct answer ✔a legal entity that exchanges a product (either a good or service) for money
or something that can be turned into money
Sole Proprietorship - correct answer ✔no seperation between owner and business (they are the same)
and the owner has to pay the debts of the company
Pros/Cons of Sole Proprietorship/Partnership - correct answer ✔Pros:
Taxed once
Easy to set up
Cons:
Owner is personally liable for the business' debts
Can't transfer ownership
Partnership - correct answer ✔no seperation between owner and business, but has multiple owners
who pay the debts of the company
Corporation - correct answer ✔a seperate legal entity from the owners for legal and tax purposes
(Corp. or Inc.)
Pros/Cons of Corporations - correct answer ✔Pros:
Owners' assests are seperate from the corporation's assets (they buy stock in the company and their
investment is the most they can lose)
, Easy to transfer ownership (through selling stock)
Cons:
Taxed twice (taxed at corp. level and when dividends are distributed)
More difficult to set up
U.S. GAAP (Generally Accepted Accounting Principles) - correct answer ✔-Set of rules/principles
created by the U.S. Financial Accounting Standards Board (FASB)
-Public companies must follow these when accounting for transactions
-Ex. Business Entity Principle, Reliability Principle, Cost Principle
U.S. Financial Accounting Standards Board (FASB) goal - correct answer ✔attempts to ensure that
accounting information is understandable, relevant and reliable
Business Entity Principle - correct answer ✔the business affairs of the company are kept separate from
the business affairs of the owners
Reliability Principle - correct answer ✔the accounting information a business provides should be
reliable and can be independently verified
Cost Principle - correct answer ✔when a company purchases assets or a service they are recorded at
actual cost/historical cost
International Financial Reporting Standards (IFRS) - correct answer ✔-Similar to GAAP, but is the
system used by companies outside of the U.S.
-Developed by the International Accounting Standards Board (IASB)
and answers already passed
2025/2026
Business - correct answer ✔a legal entity that exchanges a product (either a good or service) for money
or something that can be turned into money
Sole Proprietorship - correct answer ✔no seperation between owner and business (they are the same)
and the owner has to pay the debts of the company
Pros/Cons of Sole Proprietorship/Partnership - correct answer ✔Pros:
Taxed once
Easy to set up
Cons:
Owner is personally liable for the business' debts
Can't transfer ownership
Partnership - correct answer ✔no seperation between owner and business, but has multiple owners
who pay the debts of the company
Corporation - correct answer ✔a seperate legal entity from the owners for legal and tax purposes
(Corp. or Inc.)
Pros/Cons of Corporations - correct answer ✔Pros:
Owners' assests are seperate from the corporation's assets (they buy stock in the company and their
investment is the most they can lose)
, Easy to transfer ownership (through selling stock)
Cons:
Taxed twice (taxed at corp. level and when dividends are distributed)
More difficult to set up
U.S. GAAP (Generally Accepted Accounting Principles) - correct answer ✔-Set of rules/principles
created by the U.S. Financial Accounting Standards Board (FASB)
-Public companies must follow these when accounting for transactions
-Ex. Business Entity Principle, Reliability Principle, Cost Principle
U.S. Financial Accounting Standards Board (FASB) goal - correct answer ✔attempts to ensure that
accounting information is understandable, relevant and reliable
Business Entity Principle - correct answer ✔the business affairs of the company are kept separate from
the business affairs of the owners
Reliability Principle - correct answer ✔the accounting information a business provides should be
reliable and can be independently verified
Cost Principle - correct answer ✔when a company purchases assets or a service they are recorded at
actual cost/historical cost
International Financial Reporting Standards (IFRS) - correct answer ✔-Similar to GAAP, but is the
system used by companies outside of the U.S.
-Developed by the International Accounting Standards Board (IASB)
