ACT2200 Midterm Review.docx - ACT200 Midterm Review Chapter...

ACT200 Midterm Review
Chapter 1:
1) Organizational Forms :
 Sole proprietorship : typical small business that has one owner, where owner and business
are not separate.
 Partnership : Two or more owners, and are not separate entities.
 Corporation : file articles of incorporation. Considered its own entity and is separate from
owners. It can take out loans on its own. Shareholders  board of directors  management.
2) Accounting equation :
 Assets : stuff we own (cash, supplies, equipment, A/R)
 Liabilities : what we owe to people (N/P, A/P)
 Stockholder’s equity : ownership (CC, RE)
 A = L + SE
3) Financial Statements :
 Income statement : tells us how the company is doing (generating profit/loss), revenues –
expenses = Net income. This is for a specified period.
 Statement of Retained Earnings : tells us the amount of money we have retained. Beginning
retained earnings + net income – dividends = Ending retained earnings.
 Balance Sheet : tells us the structure and composition of the company. (Assets = Liabilities +
Stockholder’s equity). Accounts: cash, A/R, supplies, equipment, N/P, A/P, CC, RE.
 Statement of cash flows : reflects actual cash inflows and outflows. (Operating, Financing,
and Investing cash flows).
Vocab :
 Separate entity : tells us that when we look at Financial Statements we look only at that
entity.
 Faithful representation : statements accurately depict and convey economic substance of
what has occurred in the period.
 Relevance : FS must contain relevant information. *makes a difference in our decision
making.
 Unit of Measure : assume numbers represent our currency.
Chapter 2: