Accounting - Ch. 1 Quiz
Who is responsible for business debts if firm is unable to pay in a sole proprietorship?
the owner
How many owners for a partnership?
two or more owners
What is the purpose of Regulatory Agencies?
- Securities and Exchange Commission (SEC) is the federal agency that oversees the financial information of public corporations - Public corporations are those whose stock is traded on the stock exchange and over-the-counter markets
What are the EXTERNAL users of financial information?
- Tax Authorities - Suppliers - Regulatory Agencies - Unions - Banks - Investors & Potential Investors - Customers
What 3 areas in which an Accountant can practice
1. Auditing 2. Tax accounting 3. Management advisory services
What are the 5 functions of accounting?
1. Classified 2. Recorded 3. Summarized 4. Interpreted 5. Communicated
What are 4 accounting proffesions?
1. Public Accounting 2. Managerial Accounting 3. Governmental Accounting
What is one accounting firm that lost it's standing and why?
Arthur Andersen; because of the Enron scandal
How many owners for a sole proprietorship?
One owner
How many owners for a corporation?
One owner or thousands
What are the INTERNAL users of financial information?
Owners; managers; employees
Who is responsible for business debts if firm is unable to pay in a partnership?
Partners individually and jointly
What are the 4 big accounting firms?
PwC Deloitte Ernst and Young KPMG
Who is in charge of the GAAP?
SEC which delegates authority to the Financial Accounting Standards Board (FASB) that creates and manages the GAAP
What is the act that changed the accounting landscape in 2002? Why was it created?
Sarbanes-Oxley Act; the act led to a major change in the regulatory environment. The act was designed as a regulatory crackdown on a corporate fraud and corruption scandal.
What are generally accepted accounting principles (GAAP)?
They are accounting standards developed and applied by professional accountants
When does a sole proprietorship end?
When to owner: - is unable to carry on - dies -closes the firm
What do suppliers do?
assess the firms ability to pay it's bills & sets credit limit for the firm
What do tax authorities do?
decide on taxation policies; income tax, sales tax, and property tax
What do banks do?
decide whether to make a loan determine the terms of the loan
What do customers do?
determine the economic health of the business & the likelihood that the firm will remain in business
When does a corporation end?
Continues indefinitely Ends when: - Business goes bankrupt - Stockholders vote to liquidate
When does a partnership end?
Ends when partner(s): - Withdraws - Dies - Closes the firm
Who is responsible for business debts if firm is unable to pay in a corporation?
Stockholders can lose only the amount invested