Create an account
two owners, formed b/c individual doesn't have enough resources to initiate/expand business, shared control
business organization as separate legal entity owned by stockholders, investors share stock making it easy to sell/raise funds, largest revenue
Taxes and Legal Liability
corporations have less favorable tax treatment but corporation stockholders not as liable as sole prop and partnerships
Sarbanes-Oxley Act (SOX)
2002, new regulations for ACC including: top management certifying accuracy of financial info, more severe penalties, increased independence of outside auditor
3 Principal Activities
1. Finance Activities: borrow from creditors (liabilities) and sell stock to shareholders
2. Invest: assets required to operate
3. Daily Operations: revenue, supply, inventory and expenses
Beginning Retained Earnings + Net Income/Loss - Dividends = Ending Retained Earnings
Classified Balance Sheet
Current Assets + Property, Plant and Equipment = Total Assets
Current Liabilities + Long Term Liabilities + Stockholder's Equity = Total Liabilities and Stockholder's Equity
turned into cash fastest or used up in less than a year; cash, accounts receivable, inventory, prepaid insurance, short-term investments, supplies (ordered by liquidity)
Property, Plant and Equipment (PPE)
long, useful lives; land, buildings, equipment, furniture, fixtures; depreciation is subtracted
no physical substance; patent, goodwill (one company buys another company), copyrights
obligations to be paid in coming year; notes/accounts/wages/salaries/bank loans/interest/taxes payable; Notes is always first, then Acct
paid after one year; bonds/mortgage/long-term notes payable, lease/pension liabilities
Earnings per Share; EPS = net income - preferred dividends / avg # of shares outstanding
AVG # of shares outstanding =
beginning + ending / 2
Free Cash Flow
= cash flow from operating activities - cash used for capital expenditures - dividends paid
accurately depicts what really happened
3. Free from Error
1. Comparability: diff co. uses same ACC principles
2. Consistency: co. uses same ACC principles year to year
Please allow access to your computer’s microphone to use Voice Recording.
Having trouble? Click here for help.
We can’t access your microphone!
Click the icon above to update your browser permissions and try again
Reload the page to try again!Reload
Press Cmd-0 to reset your zoom
Press Ctrl-0 to reset your zoom
It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.
Please upgrade Flash or install Chrome
to use Voice Recording.
For more help, see our troubleshooting page.
Your microphone is muted
For help fixing this issue, see this FAQ.
Star this term
You can study starred terms together