Accounting Smartbook 1 Flashcards
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Questions and Answers

What are the primary functions of accounting?

communicate information to decision makers, measure a company's activities

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

  • Liabilities
  • Supplies (correct)
  • Cash
  • Equipment (correct)
  • What type of business organization is legally separate from its owners and issues shares of stock?

  • Sole Proprietorship
  • Partnership
  • Corporation (correct)
  • Limited Liability Company
  • Identify the three most common forms of business organization.

    <p>partnership, corporation, sole proprietorship</p> Signup and view all the answers

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

    <p>operating, investing, financing</p> Signup and view all the answers

    What are amounts owed to creditors called?

    <p>liabilities</p> Signup and view all the answers

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

    <p>stockholders' equity</p> Signup and view all the answers

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

    <p>corporation</p> Signup and view all the answers

    What are the three most common forms of business organization?

    <p>sole proprietorship, partnership, corporation</p> Signup and view all the answers

    What is the accounting equation?

    <p>Assets = Liabilities + Stockholders' Equity</p> Signup and view all the answers

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

    <p>liability</p> Signup and view all the answers

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

    <p>accounting equation</p> Signup and view all the answers

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

    <p>operating</p> Signup and view all the answers

    What is stockholders' equity?

    <p>the owner's claims to resources of the corporation</p> Signup and view all the answers

    What are revenues?

    <p>sales of good or services to customers</p> Signup and view all the answers

    What is an advantage of the corporate form of organization?

    <p>provides limited liability to stockholders</p> Signup and view all the answers

    What are expenses?

    <p>the costs of doing business that are necessary to produce revenue</p> Signup and view all the answers

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

    <p>Assets - Liabilities</p> Signup and view all the answers

    Study Notes

    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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    Test your knowledge of key accounting concepts with these flashcards. Each card covers fundamental topics, including the functions of accounting, assets, and forms of business organization. Perfect for students looking to reinforce their understanding of accounting principles.

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