Acct 2001 Exam 1 LSU Holmes questions with
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accurate detailed solutions || ||
Sole Proprietorship - ✔✔A business owned by one person.
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-Simple to set up || || || ||
-Gives you control of the business
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Partnership - ✔✔a business owned by two or more people associated as partners
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Corporation - ✔✔A business organized by a separate legal entity || || || || || || || || ||
-Easy to sell/transfer ownership
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-Individuals can become stockholders || || ||
-easier for corporations to raise funds
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Accounting - ✔✔The information system that identifies, records, and communicates the
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economic events of an organization to interested users.
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Internal users - ✔✔managers who plan, organize, and run a business
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-includes: marketing managers, production supervisors, finance directors, and company officers.
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External Users - ✔✔Persons using accounting information who are not directly involved in
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running the organization.
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Investors - ✔✔use accounting information to make decisions to buy, hold, or sell stock
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Creditors - ✔✔such as suppliers and bankers use accounting information to evaluate the risks of
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selling on credit or lending money.
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, Four different types of financial statements: - ✔✔Income statement, Retained earnings statement,
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Balance sheet, and statement of cash flows
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Income Statement - ✔✔a report of a company's revenues and expenses and resulting net income
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or loss for a period of time
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Retained earnings - ✔✔An amount earned by a corporation and not yet distributed to
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stockholders.
Retained earnings statement - ✔✔a report that shows the amount and causes of changes in
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retained earnings for a specific period of time|| || || || || || ||
Balance Sheet - ✔✔reports assets and claims to assets at a specific point in time
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Statement of Cash Flows - ✔✔A financial statement that provides financial information about the
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cash receipts and cash payments of a business for a specific period of time.
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Current assets - ✔✔assets that a company expects to convert to cash or use up within a year or its
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operating cycle, whichever is longer || || || ||
Operating cycle - ✔✔he average time required to go from cash to cash in producing revenue—to
|| || || || || || || || || || || || || || || ||
purchase inventory, sell it on account, and then collect cash from customers. (most of the time it is
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less than a year)
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How do companies list current assets? - ✔✔Companies list current assets in order of liquidity,
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that is, the order in which they expect to convert them into cash
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Property, Plant, and Equipment - ✔✔assets with relatively long useful lives that are currently
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used in operating the business
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accurate detailed solutions || ||
Sole Proprietorship - ✔✔A business owned by one person.
|| || || || || || || || ||
-Simple to set up || || || ||
-Gives you control of the business
|| || || || ||
Partnership - ✔✔a business owned by two or more people associated as partners
|| || || || || || || || || || || ||
Corporation - ✔✔A business organized by a separate legal entity || || || || || || || || ||
-Easy to sell/transfer ownership
|| || ||
-Individuals can become stockholders || || ||
-easier for corporations to raise funds
|| || || || ||
Accounting - ✔✔The information system that identifies, records, and communicates the
|| || || || || || || || || || ||
economic events of an organization to interested users.
|| || || || || || ||
Internal users - ✔✔managers who plan, organize, and run a business
|| || || || || || || || || ||
-includes: marketing managers, production supervisors, finance directors, and company officers.
|| || || || || || || || ||
External Users - ✔✔Persons using accounting information who are not directly involved in
|| || || || || || || || || || || || ||
running the organization.
|| ||
Investors - ✔✔use accounting information to make decisions to buy, hold, or sell stock
|| || || || || || || || || || || || ||
Creditors - ✔✔such as suppliers and bankers use accounting information to evaluate the risks of
|| || || || || || || || || || || || || || ||
selling on credit or lending money.
|| || || || ||
, Four different types of financial statements: - ✔✔Income statement, Retained earnings statement,
|| || || || || || || || || || ||
Balance sheet, and statement of cash flows
|| || || || || || ||
Income Statement - ✔✔a report of a company's revenues and expenses and resulting net income
|| || || || || || || || || || || || || || ||
or loss for a period of time
|| || || || || ||
Retained earnings - ✔✔An amount earned by a corporation and not yet distributed to
|| || || || || || || || || || || || || ||
stockholders.
Retained earnings statement - ✔✔a report that shows the amount and causes of changes in
|| || || || || || || || || || || || || || ||
retained earnings for a specific period of time|| || || || || || ||
Balance Sheet - ✔✔reports assets and claims to assets at a specific point in time
|| || || || || || || || || || || || || ||
Statement of Cash Flows - ✔✔A financial statement that provides financial information about the
|| || || || || || || || || || || || ||
cash receipts and cash payments of a business for a specific period of time.
|| || || || || || || || || || || || || ||
Current assets - ✔✔assets that a company expects to convert to cash or use up within a year or its
|| || || || || || || || || || || || || || || || || || || ||
operating cycle, whichever is longer || || || ||
Operating cycle - ✔✔he average time required to go from cash to cash in producing revenue—to
|| || || || || || || || || || || || || || || ||
purchase inventory, sell it on account, and then collect cash from customers. (most of the time it is
|| || || || || || || || || || || || || || || || ||
less than a year)
|| || || ||
How do companies list current assets? - ✔✔Companies list current assets in order of liquidity,
|| || || || || || || || || || || || || || ||
that is, the order in which they expect to convert them into cash
|| || || || || || || || || || || ||
Property, Plant, and Equipment - ✔✔assets with relatively long useful lives that are currently
|| || || || || || || || || || || || || ||
used in operating the business
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