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ACCT 201 Final Review Sheet

ACCT 201 Final Review Sheet - ACCT 201 Test 1 Review Sheet...

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ACCT 201 Test 1 Review Sheet Chapter 1: Reporting and Interpreting the Financial Results of Business Activities Three Main Types of Business Activities: 1. Operating 2. Investing 3. Financing Operating Activities – day to day events that occur when running a business. Include accounts such as Cash, Accounts Receivable and Payable, and Inventories Investing Activities – events involving investing assets into a company. Include Equipment, Property, and Other Assets Financing Activities – Exchanges in money between a business and its creditors and investors. Include Notes Payable and Contributed Capital Sole Proprietorship – A private business with a single owner. The business has no identity of its own and all assets of the business are tied to the proprietor. Any debts or legal trouble falls directly onto the head of the proprietor. If the business is sued then the business and the owner’s assets are at risk. Partnership – A business with multiple proprietors. The company is not yet public and does not have its own identity therefore the proprietor’s personal assets are still at risk. Corporation – A publicly owned company with its own identity, assets and liabilities. Stockholders are not responsible for debts of the company or any legal risks. Financial Statements: 1. Balance Sheets 2. Income Statement 3. Statement of Retained Earnings 4. Cash Flow Statement Balance Sheet Summary of what a business owns, what it owes to outsiders, and what is leftover for stockholders. Under the separate entity assumption, the balance sheet only contains the assets, liabilities, and equities of the corporation. The B/S does not contain any accounts from business owners/stockholders. Assets(A) = Liabilities(L) + Stockholder’s Equity(Eq.)
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Income Statement Summary of net income or losses as a result of money made from selling goods and providing services (revenues) minus the costs of doing business (expenditures). Net Income(NI) = Revenues(R) – Expenses(Ex) Statement of Retained Earnings Displays the amount of earnings a company has retained and how much money the corporation has paid out in dividends. *Dividends are not expenses, they are a redistribution of profits back to stockholders, Therefore they are not found in the I/S Beginning Retained Earnings +/- Net Income – Dividends = End Retained Earnings Cash Flow Statement A summary of a company’s operating, investing, and financing activities that caused a change in the company’s cash balance. *The I/S, S/RE and CF/S all documents changes in the company’s finances over a period of time while the B/S changes from one point in time to another. GAAP, FASB, PCAOB, and SEC The Generally Accepted Accounting Principles (GAAP) are rules of accounting published by the Financial Accounting Standards Board (FASB) to ensure standardized accounting practicing.
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