ACG 2021 ch 1-4 exam
Sole proprietorship Correct Answer: -simple to establish
-owner controlled
-tax advantages
Partnership Correct Answer: -simple to establish
-shared control
-broader skills
-tax advantages
Corporation Correct Answer: -easier to transfer ownership
-easier to raise funds
-no personal liability
Internal users Correct Answer: marketing, management, finance, HR
External users Correct Answer: creditors and investors
Sarbanes oxley act Correct Answer: law passed to keep financial information ethical so that investors
wouldn't lose faith in corporate accounting
3 types of business activities Correct Answer: Financing, investing, operating
Financing activities Correct Answer: borrowing money and issuing stock for cash
Investing activities Correct Answer: purchasing resources a company needs to operate (usually PP&E)
and investments
Accounting information system Correct Answer: keeps track of business activities
Operating activities Correct Answer: marketing, distributing, manufacturing, selling....
affects revenue, inventory, receivables, expenses, liabilities, net income/loss
Four financial statements (ch 1) Correct Answer: income statement, retained earnings statement,
balance sheet, statement of cash flows
Income statement Correct Answer: rev
-exp
=net inc
Retained earnings statement (Statement of stockholders equity) Correct Answer: Beg retained earnings
+owner contributions
+ net income (from inc statement)
, -dividends
=end retained earnings
Balance sheet Correct Answer: Assets= Liabilities + equity
Financial statement title format Correct Answer: Company name
Type of statement
Date
Statement of cash flows (example) Correct Answer: Cash flows from operating activities
Cash receipts (+)
Cash payments (-)
=net cash from op act
Cash flows from investing activities
Purchased equipment (-)
=net cash from inv act
Cash flows from financing activities
Issuance of common stock (+)
Issuance of note payable (+)
Payment of dividend (-)
=net cash from fin act
=Net increase in cash
+cash at beg of period
=Cash at end of period
Which financial statement is for a specific date rather than a period of time? Correct Answer: Balance
Sheet
Annual reports include Correct Answer: financial statements, management discussion and analysis,
notes to the financial statements, auditor's report
Management discussion and analysis Correct Answer: company's ability to pay near term obligations, to
fund operation and expansion, and the results of operation
Notes to the financial statements Correct Answer: clarify financial statements, provide additional
qualitative or quantitative data, explain contingencies
Auditor's opinions Correct Answer: unqualified, qualified, disclaimer, adverse
Unqualified opinion Correct Answer: no significant errors in financial statement
Qualified opinion Correct Answer: limitation of scope within audit or violation of GAAP
Disclaimer Correct Answer: auditor can't satisfy themselves w/ fairness of financial statement
Adverse opinion Correct Answer: very misstated financial statement that doesn't comply w/ GAAP
Sole proprietorship Correct Answer: -simple to establish
-owner controlled
-tax advantages
Partnership Correct Answer: -simple to establish
-shared control
-broader skills
-tax advantages
Corporation Correct Answer: -easier to transfer ownership
-easier to raise funds
-no personal liability
Internal users Correct Answer: marketing, management, finance, HR
External users Correct Answer: creditors and investors
Sarbanes oxley act Correct Answer: law passed to keep financial information ethical so that investors
wouldn't lose faith in corporate accounting
3 types of business activities Correct Answer: Financing, investing, operating
Financing activities Correct Answer: borrowing money and issuing stock for cash
Investing activities Correct Answer: purchasing resources a company needs to operate (usually PP&E)
and investments
Accounting information system Correct Answer: keeps track of business activities
Operating activities Correct Answer: marketing, distributing, manufacturing, selling....
affects revenue, inventory, receivables, expenses, liabilities, net income/loss
Four financial statements (ch 1) Correct Answer: income statement, retained earnings statement,
balance sheet, statement of cash flows
Income statement Correct Answer: rev
-exp
=net inc
Retained earnings statement (Statement of stockholders equity) Correct Answer: Beg retained earnings
+owner contributions
+ net income (from inc statement)
, -dividends
=end retained earnings
Balance sheet Correct Answer: Assets= Liabilities + equity
Financial statement title format Correct Answer: Company name
Type of statement
Date
Statement of cash flows (example) Correct Answer: Cash flows from operating activities
Cash receipts (+)
Cash payments (-)
=net cash from op act
Cash flows from investing activities
Purchased equipment (-)
=net cash from inv act
Cash flows from financing activities
Issuance of common stock (+)
Issuance of note payable (+)
Payment of dividend (-)
=net cash from fin act
=Net increase in cash
+cash at beg of period
=Cash at end of period
Which financial statement is for a specific date rather than a period of time? Correct Answer: Balance
Sheet
Annual reports include Correct Answer: financial statements, management discussion and analysis,
notes to the financial statements, auditor's report
Management discussion and analysis Correct Answer: company's ability to pay near term obligations, to
fund operation and expansion, and the results of operation
Notes to the financial statements Correct Answer: clarify financial statements, provide additional
qualitative or quantitative data, explain contingencies
Auditor's opinions Correct Answer: unqualified, qualified, disclaimer, adverse
Unqualified opinion Correct Answer: no significant errors in financial statement
Qualified opinion Correct Answer: limitation of scope within audit or violation of GAAP
Disclaimer Correct Answer: auditor can't satisfy themselves w/ fairness of financial statement
Adverse opinion Correct Answer: very misstated financial statement that doesn't comply w/ GAAP
