ACC 200 EXAM 1 (CHAPTER 1, 2, 3) 2025
QUESTIONS AND ANSWERS
Sole Proprietorship - ANS Owned by one person. Simple to set up. Owner maintains control.
Owners are liable for business debts because it is not a separate legal entity.
Partnerhsip - ANS Two more more people decide to go into business together. Often formed
when one person doesn't have the economic resources to start business alone or a person with
unique skills is needed. More favorable tax treatment. Owners are personally liable for business
debts because not a separate legal entiity.
Corporation - ANS Separate legal entity. Owned by stockholders. Investors give the business
cash or other property in exchange for shares of stock. Easier to raise funds because shares are
easier to sell and investors can invest with small amounts of money. Less favorable tax
treatment. Owners are not personally liable for debts.
Accounting - ANS The information system that identifies, records, and communicates the
economic events of an organization to interested users.
Internal and External - ANS Two types of users
Internal Users - ANS Managers who plan, organize, and run the business. Must answer
important questions. Use both internal and financial statements.
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, External Users - ANS Investors (owners), Creditors (debtors like banks and suppliers), Various
others (taxing authorities, customers, labor unions, and regulatory agencies)
Financial Statements - ANS Primary means of communicating with users?
Income statement, Retained Earnings Statement, Balance Sheet, Statement of Cash Flows -
ANS Four Financial Statements?
Income Statement - ANS Reports revenues and expenses for time period. Indicates how
successfully the business performed during the period.
Retained Earnings Statement - ANS indicates how much of previous income was distributed
to you and the other owners of your business in the form of dividends, and how much was
retained in the business to allow for future growth.
The Balance Sheet - ANS Reports what a company owns and what it owes at a point in time.
Asset - ANS Anything a company owns
Liability - ANS Anything a company owes
Net Income - ANS Revenues - Expenses where Revenue > Expenses
Net Loss - ANS Revenues - Expenses where Revenue < Expenses
What is the formula to calculate Retained Earnings? - ANS Beginning Retained Earnings + Net
Income - Dividends
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QUESTIONS AND ANSWERS
Sole Proprietorship - ANS Owned by one person. Simple to set up. Owner maintains control.
Owners are liable for business debts because it is not a separate legal entity.
Partnerhsip - ANS Two more more people decide to go into business together. Often formed
when one person doesn't have the economic resources to start business alone or a person with
unique skills is needed. More favorable tax treatment. Owners are personally liable for business
debts because not a separate legal entiity.
Corporation - ANS Separate legal entity. Owned by stockholders. Investors give the business
cash or other property in exchange for shares of stock. Easier to raise funds because shares are
easier to sell and investors can invest with small amounts of money. Less favorable tax
treatment. Owners are not personally liable for debts.
Accounting - ANS The information system that identifies, records, and communicates the
economic events of an organization to interested users.
Internal and External - ANS Two types of users
Internal Users - ANS Managers who plan, organize, and run the business. Must answer
important questions. Use both internal and financial statements.
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 1
, External Users - ANS Investors (owners), Creditors (debtors like banks and suppliers), Various
others (taxing authorities, customers, labor unions, and regulatory agencies)
Financial Statements - ANS Primary means of communicating with users?
Income statement, Retained Earnings Statement, Balance Sheet, Statement of Cash Flows -
ANS Four Financial Statements?
Income Statement - ANS Reports revenues and expenses for time period. Indicates how
successfully the business performed during the period.
Retained Earnings Statement - ANS indicates how much of previous income was distributed
to you and the other owners of your business in the form of dividends, and how much was
retained in the business to allow for future growth.
The Balance Sheet - ANS Reports what a company owns and what it owes at a point in time.
Asset - ANS Anything a company owns
Liability - ANS Anything a company owes
Net Income - ANS Revenues - Expenses where Revenue > Expenses
Net Loss - ANS Revenues - Expenses where Revenue < Expenses
What is the formula to calculate Retained Earnings? - ANS Beginning Retained Earnings + Net
Income - Dividends
Copyright ©2025 BRIGHTSTARS ALL RIGHTS RESERVED 2
