My Business Course CH. 1 Flashcards
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Questions and Answers

What does limited liability refer to?

  • Corporation (correct)
  • Sole proprietorship
  • Limited partnership
  • Partnership
  • What does shared control usually refer to?

  • Sole proprietorship
  • Nonprofit organization
  • Partnership (correct)
  • Corporation
  • Is double taxation associated with corporations?

    True

    Which business structure is the easiest to form?

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

    Which business structures make it easier to transfer ownership?

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

    U.S. GAAP is universally accepted in all countries in the world.

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

    U.S. GAAP is established by the IASB.

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

    Once established, U.S. GAAP is rarely if ever modified.

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

    The international counterpart to the FASB is IASB.

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

    GAAP can differ from one country to another.

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

    U.S. GAAP is established by FASB.

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

    U.S. GAAP is a guide to action that may change over time.

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

    At this time there is no international counterpart to the FASB.

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

    What financial statement does accounts payable belong to?

    <p>Balance Sheet</p> Signup and view all the answers

    What financial statement does cash received from the sale of equipment belong to?

    <p>Statement of Cash Flows</p> Signup and view all the answers

    What financial statement does net loss belong to?

    <p>Income Statement &amp; Statement of Stockholders Equity</p> Signup and view all the answers

    What financial statement does cash invested in the business belong to?

    <p>Statement of cash flows</p> Signup and view all the answers

    What financial statement does notes receivable belong to?

    <p>Balance Sheet</p> Signup and view all the answers

    What financial statement does rent expense belong to?

    <p>Income Statement</p> Signup and view all the answers

    What financial statement does building belong to?

    <p>Balance Sheet</p> Signup and view all the answers

    What financial statement does inventory belong to?

    <p>Balance Sheet</p> Signup and view all the answers

    What section of an annual report contains a comment that the financial statements appear to be fairly presented?

    <p>Auditor's Report</p> Signup and view all the answers

    What section of an annual report discusses new competition likely to occur next year?

    <p>MD&amp;A</p> Signup and view all the answers

    What section of an annual report contains a quantitative summary of notes payable appearing on the balance sheet?

    <p>Notes to financial statements</p> Signup and view all the answers

    What section of an annual report contains the company's 'secret' ingredients in its special sauce?

    <p>Not disclosed</p> Signup and view all the answers

    What section of an annual report would you consult to determine if a firm is a good investment with strong revenue growth?

    <p>Income Statement</p> Signup and view all the answers

    What section of an annual report would you consult to assess the riskiness of a particular investment opportunity based on debt levels?

    <p>Balance Sheet</p> Signup and view all the answers

    What section of an annual report would you explore to see how much net income a firm distributes to its stockholders?

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

    What section of an annual report would you analyze to find out how a firm financed its large expansion during the year?

    <p>Statement of cash flows</p> Signup and view all the answers

    What section of an annual report would contain the company's total liabilities?

    <p>Balance Sheet</p> Signup and view all the answers

    What section of an annual report expresses an opinion on whether financial statements followed GAAP?

    <p>Auditor's report</p> Signup and view all the answers

    What section of an annual report contains information regarding estimates used in the financial statements?

    <p>Notes to financial statements</p> Signup and view all the answers

    What section of an annual report details the cash from operations during the period?

    <p>Statement of cash flows</p> Signup and view all the answers

    What section of an annual report reports the company's total revenues for the period?

    <p>Income Statement</p> Signup and view all the answers

    What section of an annual report discusses potential risks a company may encounter in the future?

    <p>Management Discussion &amp; Analysis</p> Signup and view all the answers

    What section of an annual report details the amount of earnings distributed to stockholders?

    <p>Statement of Stockholders Equity</p> Signup and view all the answers

    What are the three types of business activities?

    <p>Financing, Investing, Operating</p> Signup and view all the answers

    The accounting equation is represented as _____?

    <p>A = L + E</p> Signup and view all the answers

    The formula for net income is _____?

    <p>Net Income = Revenue - Expenses</p> Signup and view all the answers

    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.

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    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.

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