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Midterm Study Guide

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ACC 100
Walter Krystia

P a g e 1 ZZZZ - Chapter 1 Learning Objectives 1. Distinguish among the forms of organizations (p. 6) a. Corporations J An entity organized under the laws of a government. Ownership is evidenced by shares. b. Proprietorships J Business with a single owner. c. Partnerships J Business owned by two or more individuals and with the characteristic of unlimited liability. d. Non-business J Organization operating for another purpose other than profit. 2. Describe the various types of business activities (p. 8) a. Financing J Sources of cash i. Capital stock J KL[Z }L]]}LZ} }}]}L: b. Investing J Uses of cash to procure future benefits (assets) c. Operating J Cash flows from operating activities 3. Identify the users of accounting information and their needs (p. 11) a. The primary users of financial statements are those who depend upon the economic information conveyed in those statements to make decisions. Primary users may be broadly classified as internal users and those external to the company. i. Internal users are usually managers of companies. ii. External users include shareholders, investors, creditors, and government agencies. b. Financial accounting is the branch of accounting used to communicate with outsiders through financial statements. i. Shareholders and potential shareholders ii. Bondholders, bankers, and other creditors iii. Government agencies iv. Other external users J such as other companies that wish to sell their product. 4. Explain the purpose of each of the financial statements and relationships among them. (p. 13) a. The three major financial statements i. @ZoL ZZ]ZZLZZ}} }KL[Z]LL ]o}Z]]}LZL} Z]}:o ZZZZZ7o]]o]]Z7LZZZ}o[Z]: 1. Retained earnings J Z}}L[Z]ZZLZincome less dividends paid over the life of an entity. ii. The income statement summarizes the financial activity for a period of time. Items of revenue, expense, gains, and losses are reflected in the income statement. 1. Summarizes revenues and expenses.
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