What are the 3 basic accounting activities?
Identifies, records, communicates information to interested parties
Why do we need ethics?
They give the acceptable standards of ‘good’ and ‘bad’ behavior?
Stockholders' equity is broken down into what two parts?
What is the historical cost principle’s goal?
Ensure assets are getting recorded at their cost (how much that company paid)
What is the fair value principle’s goal?
Assets and liabilities are reported at their fair value (like if you sell/settle)
What part of the accounting equation do investments fall under?
Stockholders' equity --> Common stock
What does the economic entity assumption do?
Activities of the firm need to be kept separate of all other economic entities
What does the monetary unit assumption do?
Companies need to include only transaction data expressed in money terms
What do revenues increase?
Retained Earnings
How many people own a proprietorship?
Only one, this makes them liable
How many people own a partnership?
Two or more people own parts of this business
How many people own a corporation?
So many possible, divided into shares of stock
What is a liability?
Claims against an asset
What do dividends reduce?
Retained earnings (dividends are not an expense)
What do expenses decrease?
Retained Earnings