[ACCT 209] - Midterm Exam Guide - Comprehensive Notes for the exam (19 pages long!)

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6 Feb 2017
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TAMU
ACCT 209
MIDTERM EXAM
STUDY GUIDE
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INTRODUCTION TO ACCOUNTING and its use in business decisions
What is accounting? How do accounting and bookkeeping differ?
Accounting: a process of identifying, measuring, organizing and
recording financial information AND communicating that
information to decision makers.
Bookkeeping - subset of accounting
o recording part of accounting
Who are the users of accounting information?
External Users - outside day to day operations
o Owners
possible to be an owner and still be external user
(outside day to day ops) - e.x. stockholders
o Potential owners
o Lenders
o Analysts
o Government agencies
o Financial Accounting - accounting that deals with such
outside users (thats this class!)
Internal Users - management
o Managerial Accounting
o more detailed
What is business? What are two primary objectives of every business entity?
Business: activities that provide goods and services to economic
groups
o A business (single) is just an organization or entity that
serves as an economic unit to provide goods and/or
services
o Profitability
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o Solvency
How are businesses organized? What are the advantages and disadvantages of each business
form?
Businesses may be organized (classified) by
Form
o Sole proprietorship (1 owner)
1 owner
are legally personally liable for anything that goes
wrong
NO limited liability
o Partnership
2 or more owners
again, legally personally liable for anything that goes
wrong
NO limited liability
o Corporation
legal entity
limited liability for the owners
Function (types of business activity):
o Service business
does something
e.x.
Architect, doctor, dentist, lawyer, baby sitters,
dry cleaners, etc
o Merchandising business
buy goods for resale
e.x.
Amazon, Aggie outfitters, Target, Dillards, etc
o Manufacturing business
create new products
buy raw materials
e.x.
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