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Lecture One BT 200
Terms in this set (42)
provides information for external decision makers
External Decision Makers
1. Investors who own a portion of the buisness
2. Creditors to whom the business owes money
3. Taking authorities, to whom the business owes taxes
provides information to internal decision makers for operating capital budgeting (Managers & employees)
1. Securities and Exchange Commission (SEC)
2. Financial Accounting Standards Board (FASB)
3. International Accounting Standards Board (ISAB) issues International aFinance Reporting Standards (IFRS)
Two characteristics of USEFUL accountng information
2. Faithful representation (complete, neutral, free from error)
Sole Proprietorship Definition
A business owned by one person
Sole Proprietorship Number of Owners
Sole Proprietorship Life of Organization
Organization terminates at owner's choice or death
Sole Proprietorship Personal Liability of owners for business debts
Owner is personally liable
Sole Proprietorship Taxation
Not separate taxable entities. The owner pays tax on the proprietorships' earnings.
What size business is Sole Proprietorship
A business with two or more owners and not organized as a corporation.
Partnership Number of Owners
Two or more
Partnership Life of Organization
Terminates at Partner's choice or death
Partnership: Personal Liability of owners for business debts
Partners are personally liable
Partnership is NOT taxed. Instead, partners pay tax on their share of the earnings.
What type of business is Partnership?
Professional organizations of physicians, attorneys, and accountants.
A business organized under state law that is a seperate legal entity.
Limited Liability Company Definition
A company in which each member is only liable for his or her own actions.
Corporation Number of Owners
One or more (Called Stockholders)
Limited Liability Company Number of Owners
One or more (Called Members or Partners)
Corporation Life of Organization
Limited Liability Company Life of Organization
Corporation Personal Liability of owners for business debts
Separate taxable entity. Corporation pays tax.
Limited Liability Company Personal Liability of owners for business debts
LLC is NOT taxed. Instead, members pay tax on their share of earnings.
What size business is Corporation?
Large Multinational Business
What type of business is Limited Liability Company?
Alternative to partnership.
What is the accounting equation? (basic root of accounting)
Assets = Liabilities + Equity
LEFT ALWAYS = RIGHT
Increases with insurance of Common Stock
Earned Capital is also known as ______
Ending RE (Retained Earnings) =
Beginning RE+ Net Income- Dividends
A Transaction is______
Any event that affects the financial position of the business and can be measured with faithful representation.
The Income Statement reports_________
Net income or net loss of the business for a specific period.
The Statement of Retained Earnings reports_________
how the company's retained earnings balance changed from the beginning of the period.
The Balance Sheet reports_________
on the assets, liabilities, and stockholder's equity of the business as of a specific date.
The Statement of Cash Flows reports _______
the change in cash during the period .
One of the many tools used to evaluate performance is ________
Return of Assets (ROA)
Return on Assets (ROA) measures_________
How profitably a company uses it's assets.
Return on Assets (ROA) is calculated by________
Dividing net income by average total assets.
Return on Assets (ROA Equation
Net Income/Average Total Assets
average total assets equation
(Beginning Total Assets + Ending Total Assets) / 2
What is an account?
A detailed record of all increases and decreases that have occurred in an individual asset, liability, or equity during a specific period.
THIS SET IS OFTEN IN FOLDERS WITH...
CH6 BT200 NOTES
CH 1 Handout BT200
CH 2 HANDOUT
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