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Accounting I Midterm Review Sheet & Study Material

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Accounting I Midterm Review Sheet Chapters I and II: Types of businesses: ➔ Service business (provide service based on expertise; no inventory) ➔ Merchandising business (buy products to resell) ➔ Manufacturing business (convert input into products) Forms of business organization: ➔ Sole proprietorship (one person engaged in business for profit) ➔ Partnership (two or more persons engaged in business for profit) ➔ Corporation (group of people organized as a single business entity) *Sole proprietorships and partnerships have unlimited personal liability and single taxation *Corporations have limited personal liability and double taxation *The three types of businesses can be organized as any of the forms of business *Withdrawals in a sole proprietorship: Drawings Users of accounting information: ➔ Internal users (use managerial accounting for decision-making needs for business operations) ◆ Managers, officers, and employees ➔ External users (use financial accounting for various decision-making needs_ ◆ Creditors, regulatory agencies, suppliers, investors, government GAAP: Generally accepted accounting principles ➔ Allow investors and other users to compare one company to another Cost concept: ➔ Amounts are initially recorded in the accounting records at their cost or purchase price Primary financial statements: ➔ Income Statement ➔ Balance Sheet ➔ Statement of Owner’s Equity ➔ Statement of Cash Flows *Balance Sheet: On a specific date (“snapsh ...
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