ACCT 2101 Exam 1 (CH 1-4) questions with answers.

ACCT 2101 Exam 1 (CH 1-4) questions |\ |\ |\ |\ |\ |\ |\




with answers |\




Sole Proprietorship - CORRECT ANSWERS ✔✔a business
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owned by one person. The business is a separate entity
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for accounting purposes. However, a proprietorship is not
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a separate legal entity from its owner.
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Partnership - CORRECT ANSWERS ✔✔a business owned by |\ |\ |\ |\ |\ |\ |\



two or more people, called partners, who are jointly liable
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for tax and other obligations. Like a proprietorship, no
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special legal requirements must be met in starting a
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partnership. The only requirement is an agreement |\ |\ |\ |\ |\ |\ |\



between partners to run a business together. The |\ |\ |\ |\ |\ |\ |\ |\



agreement can be either oral or written and usually |\ |\ |\ |\ |\ |\ |\ |\ |\



indicates how income and losses are to be shared. A |\ |\ |\ |\ |\ |\ |\ |\ |\ |\



partnership, like a proprietorship, is not legally separate |\ |\ |\ |\ |\ |\ |\ |\



from its owners. |\ |\




Corporation - CORRECT ANSWERS ✔✔a business legally |\ |\ |\ |\ |\ |\ |\



separate from its owner or owners, meaning it is |\ |\ |\ |\ |\ |\ |\ |\ |\



responsible for its own acts and its own debts. Separate |\ |\ |\ |\ |\ |\ |\ |\ |\ |\



legal status means that a corporation can conduct
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business with the rights, duties, and responsibilities of a
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person. A corporation acts through its managers, who are
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its legal agents. Separate legal status also means that its
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,owners, who are called shareholders/stockholders are not
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personally liable for corporate acts and debts.
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Accounting - CORRECT ANSWERS ✔✔a system that
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identifies, records, and communicates reliable, relevant,
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and comparable information to help users make better
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decisions


Financial Accounting - CORRECT ANSWERS ✔✔provides
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information primarily to External users via Financial
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Statements


aimed at serving external users by providing them with
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general-purpose financial statements |\ |\




governed by concepts and rules known as Generally
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Accepted Accounting Principles
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Generally Accepted Accounting Principles (GAAP) -
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CORRECT ANSWERS ✔✔aims to make information
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relevant, comparable, and reliable
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relevant - information affects decisions of users
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comparable - information is helpful in contrasting
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organizations

, reliable - information is trusted by users
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Securities and Exchange Commission (SEC) - CORRECT
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ANSWERS ✔✔a government agency that has the legal
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authority to establish reporting requirements and set
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GAAP for companies that issue stock to the public
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oversees proper use of GAAP by companies that raise
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money from the public through issuance of stock and
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debt


Financial Accounting Standards Board (FASB) - CORRECT
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ANSWERS ✔✔private group that sets both broad and
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specific accounting principles
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Measurement Principle / Cost Principle - CORRECT|\ |\ |\ |\ |\ |\ |\



ANSWERS ✔✔accounting information should be based on
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actual cost |\




cost is measured on a cash or equal-to cash basis
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Revenue Recognition Principle - CORRECT ANSWERS
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✔✔provides guidance on when a company must|\ |\ |\ |\ |\ |\ |\



recognize revenue |\