Business Organizations & Business Activities
These business activities are in effect when the business is working normally day-to-day.
What is operating activities?
The accumulated income of a company prior to dividends being paid
What is a net income?
This is the fundamental accounting equation.
This accounting assumption assumes that companies are accounted for separately from their owners.
What is the economic entity assumption?
This principle determines when revenue is to be recorded and reported, usually when services are performed or goods delivered.
What is the revenue recognition principle?
This business activity involves the purchase of operational assets and investments.
What is investing activities?
The owner's contributions to the company (including common stock)
What is contributed capital?
This equation gives you the company's retained earnings (two ways of expressing it).
Revenues - Expenses - Dividends OR Net Income - Dividends
This accounting assumption assumes that a company will report its financial results in monetary terms.
What is the monetary unit assumption?
This principle states that an expense is to be recorded in the SAME PERIOD as the revenue that helped generate it.
What is the expense recognition principle?
The three types of businesses
What are corporations, partnerships, and sole proprietorships?
This financial statement is usually made at the start and end of a financial period.
What is the balance sheet?
This formula provides you with the company's Gross Margin (initial profit from a sale).
What is Net Sales - Cost of Goods Sold?
This accounting assumption assumes that a company will divide its operations into custom periods of time to measure net income for specific periods.
What is the time period assumption?
This principle states that accountants should be cautious to not overstate assets or income in financial statements.
What is the conservatism principle?
This business type is a separate legal entity and can be public or private.
What is a corporation?
These were established to make financial statements easier to understand across companies.
What is Generally Accepted Accounting Principles (GAAP)?
This formula is how you find the Net Profit Margin (% of profit per sale after expenses).
Net Income / Sales Revenue
This accounting assumption assumes that a company will operate long enough to carry out its commitments and obligations.
What is the going-concern assumption?
This principle states that an activity of a company is to be measured at the exchange price (cost) of the time that the activity occurred.
What is the historical cost principle?
This business type is oftentimes comprised of law firms, investment firms, accountant agencies, and physician offices.
What is a partnership?
The Security and Exchange Commission (SEC) appointed this organization to regulate accounting standard in the United States
What is the Financial Accounting Standards Board (FASB)?
These measures can alert a creditor how likely a company is to repay its debts. One is found by Assets-Liabilities and the other is found by Assets/Liabilities.
What is working capital and current ratio?
These are the four enhancing characteristics for useful information.
What is comparability, verifiability, timeliness, and understandability?
These are the first four steps of the accounting cycle.
What are Analyze Transactions, Journalize Transactions, Post to Ledger, and Prepare Trial Balance?