Podcast
Questions and Answers
Which type of business primarily generates revenue by selling services, rather than tangible goods?
Which type of business primarily generates revenue by selling services, rather than tangible goods?
A business that buys raw materials, transforms them into finished products, and sells said products is known as what type of business?
A business that buys raw materials, transforms them into finished products, and sells said products is known as what type of business?
Which form of business ownership involves more than one owner, making them jointly responsible for the business's operations?
Which form of business ownership involves more than one owner, making them jointly responsible for the business's operations?
In the fundamental accounting equation, what is the relationship between assets, liabilities, and owner's equity?
In the fundamental accounting equation, what is the relationship between assets, liabilities, and owner's equity?
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Which of the following actions will increase a liability account?
Which of the following actions will increase a liability account?
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What is the effect on the accounts when a new vehicle is purchased?
What is the effect on the accounts when a new vehicle is purchased?
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According to the half-year rule in depreciation, what is the maximum percentage of an asset's cost that can be depreciated in its first year of use?
According to the half-year rule in depreciation, what is the maximum percentage of an asset's cost that can be depreciated in its first year of use?
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What is the key characteristic of the straight-line depreciation method?
What is the key characteristic of the straight-line depreciation method?
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Flashcards
Service businesses
Service businesses
Businesses that primarily sell services to the public rather than products.
Merchandising businesses
Merchandising businesses
Businesses that purchase goods from suppliers and then resell them to customers at a higher price.
Manufacturing businesses
Manufacturing businesses
Businesses that transform raw materials into finished products and then sell those products.
Non-profit organizations
Non-profit organizations
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Sole proprietorship
Sole proprietorship
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Partnership
Partnership
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Limited company or corporation
Limited company or corporation
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Fundamental accounting equation
Fundamental accounting equation
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Study Notes
Business Types
- Service Businesses: Provide services to customers, not physical goods. Examples include hair salons, doctors' offices, and consulting firms.
- Merchandising Businesses: Buy and resell goods to make a profit. Examples include retail stores, booksellers, and grocery stores.
- Manufacturing/Producing Businesses: Transform raw materials into new products for sale. Examples include car manufacturers, food processors, and clothing factories.
- Non-Profit Organizations: Operate to fulfill social needs, not financial profit. Examples include charities, hospitals, and schools.
Business Ownership Forms
- Sole Proprietorship: Owned and run by one person.
- Partnership: Owned and run by two or more people.
- Limited Company/Corporation: A legal entity separate from its owners (shareholders).
Fundamental Accounting Equation
- Assets = Liabilities + Owner's Equity This equation balances the business's resources (assets) with how those resources were financed (liabilities and owner's equity).
Accounting Principles (Debits and Credits)
- Debit/Credit Account Sides: The right side of an account is a credit, the left side is a debit.
- Debit Accounts: Use debits to increase asset accounts and decrease liability and equity accounts.
- Credit Accounts: Use credits to increase liability and equity accounts, and decrease asset accounts.
- Asset Increases: Debits increase asset account balances.
- Liability Increases: Credits increase liability account balances.
- Owner's Equity Increases: Credits increase owner's equity balances.
- Specific Account Examples:
- Receiving Loans: Credit the bank loan account to reflect an increase in the loan
- Equipment Loss: Debit the capital account and credit the equipment account.
- Customer Payment: Credit accounts receivable to reflect a decrease in amount owed.
- Asset Purchase: Debit the automobile account when purchasing a car.
- Loan Repayment: Debit the mortgage account.
- Supplier Invoices: Credit Accounts Payable to reflect an increase in amounts owed.
- Exceptional Balances: Debit an account payable with an exceptional balance, and Credit a bank account with an exceptional balance.
Depreciation Methods
- Straight-Line Depreciation: Distributes the asset's cost equally over its useful life.
- Declining-Balance Depreciation: Calculates depreciation by multiplying the asset's remaining value by a fixed percentage each year. This results in higher depreciation in early years.
- Half-Year Rule (Canada): Only half the asset's depreciation is allowed in the first year of use, because the majority of assets are purchased mid-year.
Inventory Systems
- Periodic Inventory System: Inventory is counted periodically, and Cost of Goods Sold is calculated based on the physical count.
- Perpetual Inventory System: Tracks inventory changes constantly, typically in an accounting ledger, ensuring real-time updates to Cost of Goods Sold.
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Description
Explore various business types, including service, merchandising, manufacturing, and non-profit organizations. Understand the different ownership forms, such as sole proprietorships and partnerships, alongside the fundamental accounting equation. Test your knowledge on these foundational concepts in business.
