ACTG2010ChapterSummary

ACTG2010ChapterSummary - Accounting Exam Review ACTG 2010...

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Accounting Exam Review ACTG 2010 Chapter Summaries Chapter 1: The Accounting Environment Stakeholders: Investors – invest Banks – lend Complementary organizations/businesses – do business with someone Management – increase in wages Accounting: a system of producing information about an entity and making that information available to people that need it/have a stake in the business. Cost/benefit trade-off: Comparing the benefits of an action to the costs and then choosing in a course of action that best suits the circumstances. 2 big questions for a big before lending money: 1. Will the company be able to pay back the money it borrowed, plus interest? 2. If the company were unable to pay me back, what resources does it have that I could take and sell to recover my money? Financial accounting: providing information to those external to a company. Ex. Investors, banks, creditors, suppliers, taxation authorities (CRA), lenders, competitors. Managerial accounting: providing information to the managers of the entity and other decision markers who work for the entity. Constraints faced by entities: contracts, law, accounting rules, moral and ethical considerations, Income Tax Act, Demands of powerful users, securities legislation, etc. Entity: is an economic unit of some sort/kind. Four types of accounting entities: Corporation: separate legal entity created under the corporation laws of Canada, a province, or some other jurisdiction in the world. Corporations have many of the same rights and responsibilities as an individual; enter into contracts, can be sued, must file TAX RETURN. Shares are distributed amongst the owners when the corporation is formed. Can also be issued at any time throughout the life of the corporation. Limited liability is present: only money that is invested in the company can be taken out when sued, no action against any specific shareholder can ensue. Public Corporations: shares can be purchased by anyone who is interested in owning a piece of the entity and has the money to buy the shares. These are usually traded on the stock exchange such as the TSX. Private Corporation: shares and other securities are not available for purchase unless it is agreed. Proprietorship: unincorporated business that has one owner. Does not pay taxes. The proprietor includes the money made in his or her personal tax return, along with money made from other sources, such as employment. Everything is pooled. NO limited liability. Partnerships: unincorporated business that has multiple two or more owners called partners. Partners can also be other corporations as well. Partnerships do not pay taxes, instead the money earned by the partnership is included in the income of the partners.
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Not-for-profit Organizations: provide social, economical, religious, educational, professional, health, and charitable services. Governments, Individuals.
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This note was uploaded on 09/25/2010 for the course ACTG ACTG 2010 taught by Professor Simeoni during the Winter '10 term at York University.

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ACTG2010ChapterSummary - Accounting Exam Review ACTG 2010...

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