chapter 1

what are the advantages to a business of being formed as a corporation? What are the disadvantages?

Advantages of a corporation are limited liability (stockholders not being personally liable for corporate debts), easy transfer ability of ownership, and easier to raise funds. Disadvantages of a corporation are increased taxation and government regulations.

What is the basic accounting equation?

Assets = Liabilities + Stockholders' Equity

what are the advantages to a business of being formed as a partnership or sole proprietorship? What are the disadvantages?

Proprietorships and partnerships receive favorable tax treatment compared to corporations and are easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and difficulty in obtaining financing compared to corporations

What is retained earnings? What items increase the balance in retained earnings? What items decrease the balance in retained earnings?

Retained earnings is the net income retained in a corporation. Retained earnings is increased by net income and is decreased by dividends and a net loss.

what are the main purpose of the statement of cash flow?

The primary purpose of the statement of cash flows is to provide financial information about the cash receipts and cash payments of a business for a specific period of time.

What are the three basic forms of business organizations?

The three basic forms of business organizations are (1) sole proprietorship, (2) partnership, and(3) corporation.

What are the three main categories of the statement of cash flows? Why do you think these categories were chosen

The three categories of the statement of cash flows are operating activities, investing activities, and financing activities. The categories were chosen because they represent the three principal types of business activity.

what are the three main types of business activity? Give examples of each activity

The three types of business activity are financing activities, investing activities, and operating activities. Financing activities include borrowing money and selling shares of stock. Investing activities include the purchase and sale of property, plant, and equipment. Operating activities include selling goods, performing services, and purchasing inventory.

how to calculate ending retained earnings

ending retained earnings = beginning retained earning+ net income-dividends or ending retained earning= beginning retained earning- net loss -dividends

(a) Define the term assets, liabilities, ad stockholders' equity (b) what items affect stockholders' equity?

(a) Assets are resources owned by a business. Liabilities are amounts owed to creditors. Put more simply, liabilities are existing debts and obligations. Stockholders' equity is the ownership claim on net assets. (b) The items that affect stockholders' equity are common stock, retained earnings, dividends, revenues, and expenses.

Indicate in which financial statement each item would appear: a Service Revenue b Equipment c Advertising Expense d Accounts Receivable e Common Stock f Interest Payable

(a) Income statement. (b) Balance sheet. (c)Income statement (d) Balance sheet. (e) Balance sheet. (f) Balance sheet.

How are each of the following financial statements interrelated? (a) Retained earnings statement and incomestatement. (b) Retained earnings statement and balancesheet. (c) Balance sheet and statement of cash flows

(a) Net income from the income statement is reported as an increase to retained earnings on the retained earnings statement. (b) The ending amount on the retained earnings statement is reported as the retained earnings amount on the balance sheet. (c) The ending amount on the statement of cash flows is reported as the cash amount on the balance sheet.

identify Liability: a cash b accounts payable c dividends d account receivable e supplies f equipment g salaries and wages payable h service revenue i rent expense

b accounts payable g salaries and wages payable