Chapter 1

Stockholders' Equity

The total amounts invested and reinvested in the business by its owners.

Financing Activities

Transactions with lenders (borrowing and repaying cash) and stockholders (selling company stock and paying dividends).

Public Company

A company that has its stock bought and sold by investors on established stock exchanges.

Private Company

A company that sells shares of its stock privately and is not required to release its financial statements to the public.

Relevance

A feature of financial information that allows it to influence a decision.

Accounting

A system that collects and processes financial information about an organization and reports that information to decision makers.

Operating Activities

Activities directly related to running the business to earn profit.

Liabilities

An amount owed by a business is called a(an)?

Corporation

An incorporated entity that issues shares of stock as evidence of ownership.

Partnership

An unincorporated business owned by two or more persons.

Accounting Systems

Analyze, record, and summarize the activities affecting its financial condition and performance.

Investing Activities

Buying and selling productive resources with long lives.

The owner is not responsible for the entity's taxes and debts if the entity is organized as a(n):

Corporation

The owner(s) of a business are not taxed on the profits of the business if the business is a

Corporation

Which of the following is typically not a benefit of corporations over other organizational forms?

Easier to create with few legal fees

Managerial accounting reports prepared for internal use are used by the company's:

Employees

Revenue

Money earned by selling goods or services to its customers.

Faithful Representation

Financial information that depicts the economic substance of business activities.

The primary goal of most companies is to:

Make a profit.

With respect to the audience targeted for financial accounting reports, which of the parties below is not an external user?

Managers of Companies issuing the reports (External users are: creditors, investors, directors, and government)

Unit of measure

Measurement of information about an entity in terms of the dollar or other national monetary unit.

Creditors are

People or organizations to whom a business owes money.

Expenses

The costs of business necessary to earn revenues.

Separate Entity

The financial reports of a business are assumed to include the results of only that business's activities.

Which of the following is a characteristic of a sole proprietorship?

The owner is personally responsible for the debts of the business even if the debts are more than the owner has invested in the business.

Assets

The resources owned by a business.

Public corporations are businesses:

Whose stock is bought and sold on a stock exchange.