Introduction to Accounting Classes
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Questions and Answers

What is the primary responsibility of public accountants?

  • Inventory management
  • Internal management decisions
  • Cost accounting
  • Auditing (correct)

Net income causes a decrease in retained earnings.

False (B)

What is considered an asset?

Land

Which of the following is a characteristic of proprietorship?

<p>Owner receives all profits (C)</p> Signup and view all the answers

Who are considered internal users of accounting data?

<p>Managers (B)</p> Signup and view all the answers

Which entity is responsible for requiring publicly traded companies to disclose financial data?

<p>SEC (A)</p> Signup and view all the answers

The formula for ending owner's capital balance is: Ending Capital = Beginning Capital + Net Income - ______.

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

Liabilities represent future obligations or debts.

<p>True (A)</p> Signup and view all the answers

Match the following terms to their definitions:

<p>Asset = Resource with future economic benefit Liability = Future obligation or debt Revenue = Income earned from business operations Expense = Cost of assets consumed or services used</p> Signup and view all the answers

Study Notes

Public vs Private Accounting

  • Public accountants work in auditing, income tax, and management advisory services.
  • Private accountants work in managerial and cost accounting functions.

Accounting Equation

  • Assets = Liabilities + Owner's Equity
  • Net income increases retained earnings.
  • Losses and dividends decrease retained earnings.
  • Investments by stockholders increase capital stock, not retained earnings.

Basic Accounting Terms

  • Expense: Cost of assets consumed or services used
  • Revenue: Income earned from business operations
  • Liability: Future obligation or debt
  • Asset: Resource with future economic benefit

Types of Businesses

  • Proprietorship (Sole Proprietorship): Owned by one person.
    • Owner is often the manager/operator.
    • Owner receives all profits, incurs all losses, and is personally liable for all debts.
  • Partnership: Owned by two or more individuals.
    • Partners share profits, losses and responsibilities.
    • Generally has unlimited personal liability for each partner.
  • Corporation: Ownership is divided into shares of stock.
    • A corporation is a separate legal entity from its owners.
    • Owners (stockholders) have limited liability.

Internal Users of Accounting Data

  • Owners
  • Managers
  • Employees
  • Executives
  • Department Heads

External Users of Accounting Data

  • Investors
  • Creditors
  • Regulatory Agencies
  • Tax Authorities
  • Customers
  • Labor Unions
  • General Public

Identifying Assets

  • Cash owned by the company is an asset, but not the only one.
  • Buildings, cash, inventory, and accounts receivable are all considered assets.
  • Sales revenue, owner's capital, operating expenses, drawings, and accounts payable are not assets.

Ending Owner's Capital Balance Formula

  • Ending Capital = Beginning Capital + Net Income (or Net Loss) - Withdrawals
  • Net Income = Revenues - Expenses

Balance Sheet

  • Reports a company's financial position at a specific point in time.
  • Presents the company's assets, liabilities, and owner's equity.

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Description

This quiz explores key concepts in public and private accounting, including fundamental accounting terms and the essential accounting equation. Additionally, it covers various types of business structures such as proprietorships and partnerships. Test your knowledge and understanding of basic accounting principles.

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