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FSU - ACG - Study Guide - Midterm

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FSU - ACG - Study Guide - Midterm

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background image ACG 2021 Exam 1 Study Guide Chapter 1 Learning Objective 1: Describe the primary forms of business organizations Sole Proprietorship:  1. Simple to establish
2. Owner controlled
3. Tax advantages
Ex: barber shops, law offices, auto repair shops
Partnership:
1. Simple to establish
2. Shared control
3. Broader skills and resources
4. Tax advantages
Ex: retail and services, lawyers, doctors, architects, CPA
Corporation:
1. Easier to transfer ownership(stocks)
2. Easier to raise funds
3. No personal liability(owners can’t get sued)
4. Subject to more regulations and taxes(double taxation)
LO2: Identify the users and uses of accounting information Internal and External users Internal: managers who plan, organize, and run a business
Finance, Marketing, Human Resources, Management
External: Investors(owners), Creditors(banks and suppliers)
Sarbanes-Oxley Act(SOX): passed to reduce unethical corporate behavior and 
decrease the likelihood of future corporate scandals
1. Top management must now certify the accuracy of financial information 
2. Penalties for fraudulent activity was increased 
3. Independence of auditors was increased
4. Increased oversight by the board of directors must occur, including the 
boards’s      selection and supervision of the independent auditor LO3: Explain the three principal types of business activity Three types: financing, investing, and operating
The accounting information system keeps track of the results of each 
Financing activities: two primary sources of outside funds are:
1. Borrowing money(debt financing)
Amounts owed are called liabilities  Party to whom amounts are owed are called creditors Notes payable and bonds payable are different types of liabilities  2. Issuing(selling) shares of stock for cash Payments to stockholders are called dividends
background image Investing activities: purchase of resources a company needs to operate Computers, delivery trucks, furniture, buildings, etc.(property, plant, and 
equipment(PP&E))
Resources owned by a business area called assets Investments are another example of an investing activity  Operation activities: once a business has the assets it needs, it can begin its  operations: Revenues- amounts earned from the sale of products(sales, service, and interest 
revenue)
Inventory- goods available for sale to customers Recievables- right to receive money from another party(accounts receivable are 
owed to by customers; interest receivable is owed by debtors)
Expenses- cost of assets consumed or services used Liabilities- arise from expenses and represent amounts owed to another 
party(accounts, wages, interest, sales taxes, and income taxes payable)
Net income- the excess of revenues over expenses Net loss- the excess of expenses over revenues LO4: Describe the content and purpose of each of the financial statements Income Statement: Revenues - Expenses = Net Income
• Reports revenues and expenses for a specific period of time
• Net income or net loss
• Past net income provides information for predicting future net income
• Needed to determine ending balance in retained earnings
Statement of Stockholder’s Equity: Beginning equity + Owner contributions + Net 
income - dividends = Ending equity
• Statement shows amounts and causes of changes in retained earnings during the 
period • Time period is the same as that covered by the income statement
• Users can evaluate dividend payment practices
Balance Sheet: Assets = Liabilities + Equity
• Reports assets and claims to assets at a specific point in time
• Lists assets first, followed by liabilities and stockholder’s equity
Statement of Cash Flows: Cash inflows - Cash outflows = Net cash flow
• Shows where cash came from
• Shows how cash was used
• Shows the change in the cash balance during a period of time
Chapter 2 LO1: Identify the sections of a classified balance sheet Current Assets

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School: Florida State University
Department: Accounting
Course: Introduction to Financial Accounting
Professor: Jeff Paterson, Luke Gordon, Armando Nunez
Term: Spring 2019
Tags: financial accounting
Name: ACG 2021 Exam 1 Study Guide
Description: This covers the materials for the first exam. The first exam is over the first two chapters in the book
Uploaded: 01/17/2019
5 Pages 29 Views 23 Unlocks
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