Questions and Answers
Select the business activity that matches with the description: Transactions related to revenues and expenses.
Select the business activity that matches with the description: Transactions with lenders and owners.
Select the business activity that matches with the description: Transactions involving the purchase and sale of productive assets.
What is a business owned by two or more persons called?
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What is an entity legally separate from its owners called?
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What is a business owned by a single person called?
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What term refers to sales of products or services?
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What are owners' claims to resources known as?
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What are distributions to stockholders called?
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What term refers to the costs of selling products or services?
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What term signifies the resources of a company?
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What term refers to amounts owed?
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What classification does Rent Expense fall under?
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What classification does Interest Revenue fall under?
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What classification do Dividends fall under?
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What classification does Land used for operations fall under?
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What classification does Accounts Payable fall under?
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What classification does Utilities Payable fall under?
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What classification does Cash available for use fall under?
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What classification do Salaries fall under?
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What classification does Common Stock fall under?
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What classification does Service Revenue fall under?
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Provide information that is useful to investors and creditors.
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Guarantee that businesses will not go bankrupt.
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Provide information about resources and claims to resources.
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Prevent competitors from offering lower-priced products.
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Provide information to help users in predicting future cash flows.
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Maximize tax revenue to the federal government.
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Study Notes
Business Activities
- Operating: Involves transactions related to revenues (sales of products/services) and expenses (costs incurred).
- Financing: Includes transactions with lenders and owners, focusing on raising capital.
- Investing: Pertains to transactions involving the purchase and sale of productive assets (e.g., land, equipment).
Forms of Business Organizations
- Partnership: A business structure owned by two or more individuals sharing profits and liabilities.
- Corporation: A legal entity distinct from its owners, providing limited liability to shareholders.
- Sole Proprietorship: A business owned by a single person bearing full responsibility for profits and debts.
Account Classifications
- Revenues: Income generated from sales of products or services.
- Stockholders' Equity: Represents the owners' claims on the company's assets after all liabilities.
- Dividends: Distributions of a company's earnings to its shareholders.
- Expenses: Costs associated with operating the business, like selling products or services.
- Assets: Resources owned by a company that provide future economic benefit.
- Liabilities: Obligations or amounts owed to creditors.
Account Classification Assignments
- Rent Expense: Classified as an expense related to rent costs.
- Interest Revenue: Recognized as revenue earned from interest on savings.
- Dividends: Payments made to stockholders, categorized as dividends.
- Land: An asset used in business operations.
- Accounts Payable: Owed amounts to suppliers classified as liabilities.
- Utilities Payable: Liabilities for utility services not yet paid.
- Cash: Available cash classified as an asset.
- Salaries: Expense corresponding to employee compensation.
- Common Stock: Represents ownership shares sold to investors, classified as stockholders' equity.
- Service Revenue: Income generated from providing services, classified as revenue.
Objectives of Financial Accounting
- Useful Information: Aims to provide relevant data for investors and creditors to assess business viability.
- Resource Reporting: Offers insights on company resources and claims against them.
- Future Cash Flow Prediction: Aims to furnish information that assists in anticipating future financial performance.
- Bankruptcy Assurance: Does not guarantee business solvency or prevent bankruptcy.
- Tax Maximization: Does not focus on optimizing tax revenue for the government.
- Competitive Pricing Defense: Not aimed at preventing competitors from lowering prices.
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Description
Test your understanding of business activities with these flashcards based on Chapter 1. Each card presents a description that you must match to the correct business activity. Perfect for grasping key concepts related to operating and financing activities in business.
