TAMU ACCT 229 - Exam 1 UPDATED
ACTUAL Questions and CORRECT
Answers
3 types of businesses - CORRECT ANSWER- ✔✔sole proprietorship, partnership,
corporation
unlimited liability - CORRECT ANSWER- ✔✔sole proprietorship & partnership
limited liability - CORRECT ANSWER- ✔✔corporation
Sole Proprietorship - CORRECT ANSWER- ✔✔one owner
advantage: easy to form
separate entity for accounting purposes
not a separate entity for legal purposes or tax purposes
Partnership - CORRECT ANSWER- ✔✔two or more owners
separate entity for accounting purposes
not a separate entity for legal or tax purposes
Corporations - CORRECT ANSWER- ✔✔business incorporated under the laws of a
particular state.
Advantages: limited liability, continuity of life, ease in transfer of stock (ownership),
opportunity to raise large amounts of money by selling shares of stock to a large number of
people.
3 types of business activities - CORRECT ANSWER- ✔✔financing, investing, operating
Operating Activities - CORRECT ANSWER- ✔✔everyday activities
-sell inventory, pay employees
, Investing Activities - CORRECT ANSWER- ✔✔how you grow your company
-buying building, equipment, vehicles, fixtures
Financing Activities - CORRECT ANSWER- ✔✔how you pay for your growth
-borrow money: temporary financing
-issue stock: permanent
4 financial statements - CORRECT ANSWER- ✔✔Income statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
What does a balance sheet show? - CORRECT ANSWER- ✔✔Shows the financial position
of a company at a point in time. A = L + SHE
Assests - CORRECT ANSWER- ✔✔what a company owns, or what is owed to a company
Laiabilities - CORRECT ANSWER- ✔✔what the company owes
Stockholders Equity - CORRECT ANSWER- ✔✔ownership. (common stock & retained
earnings)
Monetary Unity Assumption - CORRECT ANSWER- ✔✔Only transactions that can be
expressed in terms of money can be included in the accounting records
Economic Entity Assumption - CORRECT ANSWER- ✔✔Activities of the business are
separate from activities of the owners
Time Period Assumption - CORRECT ANSWER- ✔✔The long life of a company can be
reported over a series of shorter time periods. Makes it possible to prepare the Income
Statements for a specific time period.
ACTUAL Questions and CORRECT
Answers
3 types of businesses - CORRECT ANSWER- ✔✔sole proprietorship, partnership,
corporation
unlimited liability - CORRECT ANSWER- ✔✔sole proprietorship & partnership
limited liability - CORRECT ANSWER- ✔✔corporation
Sole Proprietorship - CORRECT ANSWER- ✔✔one owner
advantage: easy to form
separate entity for accounting purposes
not a separate entity for legal purposes or tax purposes
Partnership - CORRECT ANSWER- ✔✔two or more owners
separate entity for accounting purposes
not a separate entity for legal or tax purposes
Corporations - CORRECT ANSWER- ✔✔business incorporated under the laws of a
particular state.
Advantages: limited liability, continuity of life, ease in transfer of stock (ownership),
opportunity to raise large amounts of money by selling shares of stock to a large number of
people.
3 types of business activities - CORRECT ANSWER- ✔✔financing, investing, operating
Operating Activities - CORRECT ANSWER- ✔✔everyday activities
-sell inventory, pay employees
, Investing Activities - CORRECT ANSWER- ✔✔how you grow your company
-buying building, equipment, vehicles, fixtures
Financing Activities - CORRECT ANSWER- ✔✔how you pay for your growth
-borrow money: temporary financing
-issue stock: permanent
4 financial statements - CORRECT ANSWER- ✔✔Income statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows
What does a balance sheet show? - CORRECT ANSWER- ✔✔Shows the financial position
of a company at a point in time. A = L + SHE
Assests - CORRECT ANSWER- ✔✔what a company owns, or what is owed to a company
Laiabilities - CORRECT ANSWER- ✔✔what the company owes
Stockholders Equity - CORRECT ANSWER- ✔✔ownership. (common stock & retained
earnings)
Monetary Unity Assumption - CORRECT ANSWER- ✔✔Only transactions that can be
expressed in terms of money can be included in the accounting records
Economic Entity Assumption - CORRECT ANSWER- ✔✔Activities of the business are
separate from activities of the owners
Time Period Assumption - CORRECT ANSWER- ✔✔The long life of a company can be
reported over a series of shorter time periods. Makes it possible to prepare the Income
Statements for a specific time period.
