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.
