Forms of Business Organization Quiz

A business owned and managed by one person, with unlimited liability for debts.

A business owned and managed by two or more individuals, with unlimited liability for debts.

A business structure with separate legal personality, where owners have limited liability for debts.

The legal responsibility of a business owner for all the debts and obligations of the business.

The legal protection of a business owner, where their personal assets are not at risk for business debts.

A financial statement that summarizes a company's revenues and expenses over a specific period, typically a month, quarter, or year.

A financial statement that shows the changes in a company's equity over a specific period, typically a month, quarter, or year.

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

A list of all the accounts in a company's general ledger, along with their balances.

An accounting entry that involves adjusting the balance of an expense or revenue account at the end of an accounting period, to match the period's revenue and expenses.

An expense that has been incurred but not yet paid for.

A revenue that has been earned but not yet collected.

A payment made for a good or service that will be used in the future.

A method of inventory accounting where the cost of goods sold is calculated after each sale. This means the inventory balance is continuously updated.

A method of inventory accounting where the cost of goods sold is calculated only at the end of a period. This means inventory balance is updated only periodically.

The point at which the buyer becomes responsible for the goods and the cost of shipping. Freight costs belong to the buyer.

The point at which the seller remains responsible for the goods and the cost of shipping. Freight costs belong to the seller.

The cost of transporting the goods from seller to buyer. This is added into the inventory cost under the perpetual system.

The cost of goods sold is calculated after each sale, making the inventory balance accurate at any time. This requires frequent updates to the inventory record.

A financial ratio that measures a company's ability to pay its short-term obligations using its most liquid assets.

A financial ratio that measures how quickly a company can turn its inventory into cash.

A financial ratio that measures the value of a company's assets.

A financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

The process of allocating the cost of a long-lived asset over its useful life.

The process of allocating the cost of an intangible asset over its useful life.

The cost of goods sold (COGS) is the direct costs incurred in producing the goods that a company sells. It includes materials, labor, and manufacturing overhead.

The periodic inventory system is a method of accounting for inventory where the value of ending inventory and the cost of goods sold are calculated at the end of each accounting period.

The perpetual inventory system is a method of accounting for inventory where the value of ending inventory and the cost of goods sold are continuously updated for each sale and purchase.

Specific identification is a cost determination method used to match the actual cost of each item sold to the item's sales price. It's ideal for unique or high-value items.

First-in, first-out (FIFO) is a cost determination method that assumes the oldest inventory items are sold first. In periods of rising prices, FIFO results in lower COGS and higher ending inventory.

Average cost is a cost determination method that calculates a weighted average cost for all inventory units, which is then applied to each unit sold. It smooths out fluctuations in costs.

When prices are rising, FIFO (First-In, First-Out) results in a higher ending inventory value because the newer, more expensive inventory items are left in stock. This can make a company look more profitable.

When prices are rising, FIFO (First-In, First-Out) results in lower cost of goods sold (COGS). This is because the older, less expensive inventory is assumed to be sold first, leading to a lower expense.

When prices are rising, average cost results in a middle ground for both ending inventory and cost of goods sold (COGS). It's less affected by price fluctuations than FIFO but doesn't fully smooth out the impact.

When the cost of goods sold (COGS) is lower, the company's gross profit is higher, leading to a potentially higher net income. This can make the company appear more profitable on paper.

A financial ratio that measures how effectively a company utilizes its assets to generate sales.

A financial ratio that indicates a company's overall profitability in relation to its assets.

A situation where a new partner's capital contribution is more than the value of the partnership interest they acquire.

A situation where a new partner's capital contribution is less than the value of the partnership interest they acquire.

A journal entry to record a new partner's investment in a partnership when the investment is equal to the value of the partnership interest acquired.

A journal entry recording the change in ownership when an existing partner sells their interest to a new partner.

A measure of a company's profitability and efficiency, indicating how effectively assets are used to generate sales.