Questions and Answers
What does limited liability refer to?
What does shared control usually refer to?
Is double taxation associated with corporations?
True
Which business structure is the easiest to form?
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Which business structures make it easier to transfer ownership?
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U.S. GAAP is universally accepted in all countries in the world.
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U.S. GAAP is established by the IASB.
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Once established, U.S. GAAP is rarely if ever modified.
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The international counterpart to the FASB is IASB.
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GAAP can differ from one country to another.
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U.S. GAAP is established by FASB.
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U.S. GAAP is a guide to action that may change over time.
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At this time there is no international counterpart to the FASB.
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What financial statement does accounts payable belong to?
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What financial statement does cash received from the sale of equipment belong to?
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What financial statement does net loss belong to?
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What financial statement does cash invested in the business belong to?
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What financial statement does notes receivable belong to?
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What financial statement does rent expense belong to?
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What financial statement does building belong to?
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What financial statement does inventory belong to?
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What section of an annual report contains a comment that the financial statements appear to be fairly presented?
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What section of an annual report discusses new competition likely to occur next year?
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What section of an annual report contains a quantitative summary of notes payable appearing on the balance sheet?
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What section of an annual report contains the company's 'secret' ingredients in its special sauce?
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What section of an annual report would you consult to determine if a firm is a good investment with strong revenue growth?
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What section of an annual report would you consult to assess the riskiness of a particular investment opportunity based on debt levels?
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What section of an annual report would you explore to see how much net income a firm distributes to its stockholders?
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What section of an annual report would you analyze to find out how a firm financed its large expansion during the year?
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What section of an annual report would contain the company's total liabilities?
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What section of an annual report expresses an opinion on whether financial statements followed GAAP?
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What section of an annual report contains information regarding estimates used in the financial statements?
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What section of an annual report details the cash from operations during the period?
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What section of an annual report reports the company's total revenues for the period?
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What section of an annual report discusses potential risks a company may encounter in the future?
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What section of an annual report details the amount of earnings distributed to stockholders?
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What are the three types of business activities?
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The accounting equation is represented as _____?
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The formula for net income is _____?
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Study Notes
Business Structure Terms
- Limited liability applies to corporations, protecting owners from personal financial risk.
- Shared control is a key feature of partnerships, where multiple individuals share management responsibilities.
- Corporations face double taxation, meaning profits are taxed at both the corporate level and when distributed as dividends.
Business Types
- Sole proprietorships are the easiest business structures to form.
- Partnerships and sole proprietorships allow for easier transfer of ownership compared to other business types.
U.S. GAAP
- U.S. GAAP (Generally Accepted Accounting Principles) is not universally accepted worldwide.
- Created by the Financial Accounting Standards Board (FASB) and not the IASB (International Accounting Standards Board).
- U.S. GAAP is subject to modification and change over time.
- GAAP can vary from country to country, highlighting the lack of uniform guidelines globally.
- FASB's international counterpart is IASB, responsible for setting international accounting standards.
Financial Statements and Their Components
- Accounts Payable appears on the Balance Sheet.
- Cash Received from the Sale of Equipment is tracked in the Statement of Cash Flows.
- Net Loss is reported in both the Income Statement and the Statement of Stockholders Equity.
- Cash Invested in the business is detailed in the Statement of Cash Flows.
- Notes Receivable and Inventory are recorded on the Balance Sheet.
- Rent Expense is included in the Income Statement.
- Building is an asset listed on the Balance Sheet.
Auditor's Report and Annual Report Sections
- The Auditor's Report includes an opinion on whether financial statements adhere to GAAP.
- The Management Discussion & Analysis (MD&A) section discusses potential risks and competition.
- Notes to Financial Statements provide quantitative details about items like notes payable.
- Not disclosed information may include crucial proprietary business strategies.
Analyzing Investment Opportunities
- The Income Statement is crucial for assessing revenue growth potential for investment decisions.
- The Balance Sheet is important when analyzing a firm's risk based on debt levels relative to equity.
- The Statement of Stockholders Equity shows how much net income is distributed to stockholders.
- The Statement of Cash Flows explains financing mechanisms for large business expansions.
Business Activities
- Business operations encompass three activity types: financing, investing, and operating.
Financial Statement Basics
- The Balance Sheet follows the equation: Assets = Liabilities + Equity.
- The Income Statement shows Net Income as Revenue minus Expenses for a specific period.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge with these flashcards based on Chapter 1 of the Business Course. Each card presents key terms and their definitions related to business structures and concepts. Perfect for quick revision and mastery of essential business vocabulary.
