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33:010:272 Lecture Notes - Lecture 2: Limited Liability, Retained Earnings, Common Stock

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byzantiumeel129

28 Nov 2016

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Rutgers University

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Document Summary

Partnership: 2 or more, general unlimited liability. Basic accounting equation: assets = liabilities + stockholders equity: claims of creditors (liabilities) must be paid before ownership claims (stockholders equity) Stockholders equity: ownership claim on total assets, calld also residual equity, includes common stock and retained earnings: common stock: what investors put in, retained earnings: accumulated profits over years. Expenses: cost of assets consumd or cost of doing business. Transactions: can be internal or external: what gets recorded in accounting records. Stockholders equity: common stock & retained earnings: retained earnings: revenue expenses dividends. 4 financial statements: income statement, statement of retained earnings, balance sheet, statement of cash flows: income statement: net income/loss. Looks at revenues and expenses: retained earnings: add net income, take out dividends. You can see retained earnings (net income dividends: balance sheet: total assets, total liabilities, and stockholders equity. Ending balance in retained earnings needed in preparing balanced sheet. Public accounting: careers in auditing, taxation, management consult, general public.

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Related Questions

QUESTION 1

The ownership of a corporation is represented by:

		shares of stock.
		the owner's capital account.
		the revenue account.
		cash in bank account.

QUESTION 2

How many classifications does a Capital Stock Account have?

		One
		Two
		Three
		Four

QUESTION 3

The equity contributed by stockholders and equity earned throughbusiness profits represent the stockholders' equity for a:

		partnership firm.
		sole proprietorship.
		corporation.
		none of these.

QUESTION 4

Retained earnings are a part of a/an:

		asset account.
		permanent account.
		stockholders' equity account.
		temporary account.

QUESTION 5

How many sections does an Income Statement have?

		Two
		Three
		Four
		Five

QUESTION 6

Net sales are related to the:

		net income section.
		gross profit on sales section.
		revenue section.
		cost of merchandise sold section.

QUESTION 7

Sales discount and sales return and allowance are:

		revenue accounts.
		contra revenue accounts.
		permanent accounts.
		contra expenses accounts.

QUESTION 8

The total cost related to merchandise purchases during anaccounting period is the:

		net purchase.
		cost of merchandise sold.
		cost of merchandise available for sale.
		beginning merchandise inventory.

QUESTION 9

The gross profit on sale is $65,000, and operating expenses is$35,000. What will be the operating profit?

		$65,000
		$35,000
		$100,000
		$30,000

QUESTION 10

A balance sheet has the following sections:

		Assets, liabilities, and stockholders' equity.
		Income, expenses, and stockholders' equity.
		Assets, liabilities, and income.
		Operating income, operating expenses, and stockholders'equity.

QUESTION 11

A cash flow statement is used to assess the:

		net increase or decrease of cash.
		net increases of cash only.
		net decrease of cash only.
		net profit or loss of business.

Match the items below by entering the appropriate answer letter choice from the column provided on the right.

	1.Net income retained in the corporation.
	2. Creditors cannot go after stockholderâs personal assets to satisfy their claims.
	3. Retained earnings currently unavailable for dividends.
	4. A corporationâs own stock that has been reacquired by the corporation.
	5. Responsible to stockholders for corporate activity.
	6. The amount assigned to each share of stock in the corporate charter.
.	7. The date the board of directors formally declares the dividend and announces it to stockholders.
	8. A debit balance in retained earnings.
	9. Capital contributed by stockholders.
	10. The death of a stockholder or employee does not affect the going concern of the corporation.
	11. The company determines ownership of the outstanding shares for dividend purposes.
	12. Unit of ownership in a corporation.
-	13. This type of dividend for the stockholder results in more shares of stock, but no change in ownership interest.
	14. The issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share. This stock transaction does not require an accounting entry.
	15. The acts of the owners (stockholders) do not bind the corporation.

A.	Par value
B.	Record date
C.	Retained Earnings
D.	Indefinite life
E.	Treasury stock
F.	Stock split
G.	Declaration date
H.	Retained Earnings restrictions
I.	Stock dividend
J.	Capital stock
K.	Deficit
L.	Paid-in capital
M.	Cash dividend
N.	Board of directors
O.	Separate legal entity
P.	Limited liability

1. Creditors' claims on the assets of a company are called: (Points : 2)

2. The primary objective of financial accounting is: (Points : 2)

To serve the decision-making needs of internal users

To provide financial statements to help external users analyze and interpret an organization's activities

To monitor and control company activitiesTo provide information on both the costs and benefits of managing products and services

To know what, when and how muchto produce

3. Assets created by selling goods and services on credit are: (Points : 2)

Accounts payable

Accounts receivable

4. The debt ratio is used: (Points : 2)

To measure the amount of equity relative to the expenses

To reflect the risk associated with a company's debts

Only by banks when a business applies for a loan

To determine how much debt a firm should pay off

5. Net Income: (Points : 2)

Decreases equity

Represents the amount of assets owners put into a business

Equals assets minus liabilities

Is the excess of revenues over expenses

Represents the owners' claims against assets

6. Internal users of accounting information include: (Points : 2)

Government regulators

Line Supervisor

7. Risk is: (Points : 2)

Net income divided by average total assets

The reward for investment

The uncertainty about the expected return that will be earned from an investment

Unrelated to expected return

8. An example of an operating activity is: (Points : 2)

Purchasing office equipment

Borrowing money from a bank

Paying off a loan

9. Which accounting assumption assumes that all accounting information is reported monthly or yearly? (Points : 2)

Business entity assumption

Monetary unit assumption

Value assumption

Cost assumption

Time period assumption

10. Distributions of assets by a business to its stockholders are called: (Points : 2)

Retained earnings