ACCOUNTING EXAMINATION 1
sole proprietorship - answer-owned by one individual, easiest doesn't require special legal maneuvers. Profits or losses become apart of the taxable income of the oner and they are responsible
partnership - answer-legal liabilities are responsible of to or more owe...
ACCOUNTING EXAMINATION 1
sole proprietorship - answer-owned by one individual, easiest doesn't require special legal maneuvers. Profits or
losses become apart of the taxable income of the oner and they are responsible
partnership - answer-legal liabilities are responsible of to or more oweners. More $, lawyer typically needed.
more owners more resources.
Corporation - answer-Separate entity from legal/accounting perspectives. Owners are not responsible for taxes
and debts. Owners cant lose more then their investment. Downside is legal fees to create are expensive, income
taxes must be paid by both the corporation and its owners.
Creditors - answer-Suppliers, Banks, anyone whom money is owed. Will evaluate a companies financial
statements and credit history before credit.
Investors - answer-Existing/potential stockholders. Look to accounting info to asses strength and estimate its
value.
Directors - answer-Compnys board. Stockholders elect directors to oversee managers. Use financial statements
to ensure the companys make best decisons.
goverment - answer-looks closely at financial statements.
(SEC)- responsible for function of stock markets, keeps close atch on the informtion public companies report in
financial statements.
(IRS) - Use financial statement to ensure taxes are correct
Assets - answer-Resources the company controls
Liabilites - answer-measurable amounts the company expects to give up in the future to settle owes to creditors
Stockholders' Equity - answer-owners claims on assets of the business after creditors claims have been fulfilled
Separate Entity Assumption - answer-business transactions are separate from and should exclude the personal
transactions of the owners.
Common Stock ( Paid-in capitol ) - answer-Paid by stockholders the owners have a claim for amounts they
contributed in exchange for stock.
Retained Earnings ( Earned Capitol ) - answer-equity earned by company
revenues - answer-earned by selling good or services.
expenses - answer-Costs of doing business necessary to earn revenue expenses such as advertising utilities rent
salaries wages insurance and supplies used in the office.
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