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ATG 1

QuestionAnswer
Sole Proprietorship A business owned and operated by one person. Easy to form. Disadvantage: Personally liable for business.
Partnerships Two or more people need a partnership agreement. Personal liabilities.
Corporation It is a seperate entity. Not personally liable. Disadvantage: Legal fees, double taxation.
Accounting A system of analyzing, recording, and summarizing the results of a business's activities and then reporting the results to decision makers.
Private accountant A hired accountant to work as an employee of a business.
Public accountant Provides advice to a variety of businesses.
Managerial accounting reports Include detail financial plans and updated reports about the operating performance of the company. (internal users).
Creditors Anyone to whom money is owed.
Basic Accounting equation Assets = Liabilities + Stockholders Equity
Seperate entity assumption Financial reports of a business are assumed to include the results of only that business's activities.
Assets Economic resource controlled by company it has measurable value and is expected to benefit the company by producing cash inflows or reducing cash outflows.
Liabilities Measurable amounts that the company owes to creditors.
Stockholders equity Represents the owners claims on the business. Contributed Capital and Retained Earnings.
Contributed Capital Paid in by stockholders.
Retained Earnings Earned by the company. Revenues - Expenses= Net income.
Financial Statements Income Statement, Statement of Retained Earnings, Balance Sheet, and Statement of cash flows.
Income statement Reports the amount of revenues less expenses for a period of time.
Statement of Retained Earnings Reports the way that net income and the distribution of dividends affected the financial position of the company during the period.
Balance Sheet Reports the amount of assets, liabilities, and stockholders equity of a business at a point in time.
Statement of cash flows Reports the operating, investing, and financing activities that caused increases and decreases in cash during the period.
Generally accepted accounting principles (GAAP) Are rules and guidelines for preparing financial statements. Governs accounting in the U.S.
Cost Principle Assets and Liabilities should be initially recorded at their original cost to the company.
Current Assets To be used up or converted into cash within 12 months of the balance sheet date.
Current Liabilities Debts and obligations that will be paid, settled, or fulfilled within 12 months of the balance sheet date.
Noncurrent (long term) Assets and Liabilities that do not meet the definition of current.
Cost Principle Assets and Liabilities should be initially recorded at their original cost to the company.
Cost Principle Assets and Liabilities should be initially recorded at their original cost to the company.
Current Assets To be used up or converted into cash within 12 months of the balance sheet date.
Current Assets To be used up or converted into cash within 12 months of the balance sheet date.
Current Liabilities Debts and obligations that will be paid, settled, or fulfilled within 12 months of the balance sheet date.
Noncurrent (long term) Assets and Liabilities that do not meet the definition of current.
Financing Activities Liabilities and Stockholders Equity.
Investing Activities Assets, corporation is investing in itself.
Financing Activities Liabilities and Stockholders Equity.
Opperating Activities The day to day operations.
Investing Activities Assets, corporation is investing in itself.
Unearned Revenue A liability representing a company's obligation to provide goods or services to customers in the future.
Accrual Basis of accounting Revenue and espenses are not recorded when cash is received or payed. Accepted under GAAP.
Opperating Activities The day to day operations.
Deferrals Are used to decrease balance sheet accounts and increase corresponding income statement accounts
Accruals Company has earned revenue
Unearned Revenue A liability representing a company's obligation to provide goods or services to customers in the future.
Accrual Basis of accounting Revenue and espenses are not recorded when cash is received or payed. Accepted under GAAP.
Deferrals Are used to decrease balance sheet accounts and increase corresponding income statement accounts
Accruals Company has earned revenue and incurred expense but hasn't reported it yet.
Post closing Trial Balance An internal report prepared as the last step in the accounting cycle to check that debits equal credits and all temporary accounts have been closed.
Closing Entries You close only temporary accounts such as revenue, expenses, and dividends.
Common stock Each shares of common stock gives the stockholder the right to bote on election of board members, receive dividends, keep the same % of shares when new ones are issued, and share in asset upon liquidation.
Authorized stock Amount of stock the corporation is authorized to sell as indicated in the charter.
Issuance of stock Corporation issue stock directly to investors through an investing banking firm.
Outstanding shares Shares that are currently held by stockholders.
Treasury stock Issued shares that have been reacquired by the company.
Par Value An insignificant value per share of capital stock specified in the charter.
No-Par value stock Capital stock that has no par value specified in the corporate charter.
Dividends Are distributions by a corporation to its stockholders. Return on your investment. They are generally reported quarterly as a $ amount per share.
Decalred dividends The board of directors has full authority to determine dividends. We dont accure dividends as we do with interest. They are not liability unless declared.
Stock dividends Its a distribution of the corporations own stock to stockholders. Results in a decrease in retained earnings and an increase in contributed capital.
Stock split Involves the issuance of additional shares of stock. Increase market liability of the stock by reducing its market value.
Preferred stock Stock that has specified rights over common stock.
Cash flows from operating activities Cash inflows and outflows related to components of net income.
Cash flows from investing activities Cash inflows and outflows related to the sale or purchase of investments and long-lived assets.
Cash flows from financing activities Cash inflows and outflows related to financing sources external to the company.
Direct method Reports the components of cash flows from operating activities as gross receipts and gross payments.
Indirect method Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.
Created by: lkootman