Accounting Smartbook 1 Flashcards

What are the primary functions of accounting?

Which of the following items are assets? (Select all that apply)

What type of business organization is legally separate from its owners and issues shares of stock?

Identify the three most common forms of business organization.

What are the three types of business activities of a company in financial accounting?

What are amounts owed to creditors called?

What do you call the owners' claims to the resources of a company for a corporation?

What is a business organization that is legally separate from its owners?

What are the three most common forms of business organization?

What is the accounting equation?

Any amount owed to a creditor is classified in the balance sheet as a?

What is the fundamental model of business valuation commonly referred to as?

____________________ activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to customers.

What is stockholders' equity?

What is an advantage of the corporate form of organization?

Using the accounting equation, how can stockholders' claims on the resources of the corporation be expressed?

Functions of Accounting

Primary functions include communicating information to decision makers and measuring a company's activities.

Assets

Assets are items such as supplies and equipment.

Business Organization

A corporation is a form of business organization that is legally separate from its owners and can issue shares of stock.

Common Business Structures

The three most common forms of business organization are sole proprietorship, partnership, and corporation.

Business Activities in Financial Accounting

Companies engage in three types of business activities: operating, investing, and financing.

Liabilities

Liabilities refer to amounts owed to creditors.

Stockholder's Equity

For a corporation, stockholder's equity represents the owners' claims to the company's resources.

Accounting Equation

The accounting equation is expressed as: Assets = Liabilities + Stockholders' Equity.

Balance Sheet Classification

Any amount owed to a creditor is classified as a liability in the balance sheet.

Fundamental Business Valuation Model

The accounting equation serves as the fundamental model for business valuation.

Operating Activities

Operating activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to customers.

Revenue Definition

Revenues are defined as sales of goods or services to customers.

Corporate Advantages

One advantage of a corporate structure is that it provides limited liability protection to stockholders.

Expenses

Expenses are the costs incurred in the process of conducting business necessary for generating revenue.

Stockholders' Claims Representation

Stockholders' claims on a corporation's resources can be calculated using the formula: Assets - Liabilities.

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