Generally Accepted Accounting Principles and Cash Flows- Cash Essay

Submitted By TarahWooten1
Words: 515
Pages: 3
Open Document
Chapter 1 Continuing Problem
ACCT 201

Sole-proprietorship and Partnership- An advantage would be that any income the company makes is only taxed once. A disadvantage to having one of these two forms of business is the loss of personal assets due to the inability of the company to pay it's legal obligations to creditors. Corporation- One advantage of a corporation is the limited liability of stockholder's. This means that the stockholder's are not responsible for the corporations financial obligations because it is it's own entity. Double taxation is a disadvantage to this for of business, because any income that the company makes is taxed twice. First, the corporations income is taxed and second, the stockholder's have to pay taxes on any dividends that were distributed to them as a result of the corporations income. Because Tony and Suzie both want to start this business, I would recommend a partnership. They could split start-up costs and work together to help their business prosper. Finance activities would be external funding used to get the business going. There are two forms; the owners investing in their own company and creditors lending money to the company. Investing activities follow the financing activities. The investing activities include the purchase of long-term resources like land, buildings, and machinery. This also includes any resources that are purchased but not directly related to the company's normal operations. Operating activities are transactions related to the operations of the company. These transactions include the products and services provided to costumers, such as kayaking, mountain biking, rock climbing, etc. Other operating activities would be costs of running the business. Some these costs include utilities, taxes, advertising, rent, etc. Assets- Cash, Accounts Receivable, Supplies, Equipment, Buildings, etc. Liabilities- Accounts Payable, Salaries Payable, Interest Payable, Utilities Payable, Notes Payable. Stockholder's Equity- Common Stock, Retained Earnings. Revenues- Service Revenue Expenses- Salaries Expense, Rent Expense, Supplies Expense, Interest Expense, Utilities Expense, Other Expenses. Income Statement: Reports the company's revenues and expenses over a certain period of time. This statement will tell you in
Show More

Related Documents: Generally Accepted Accounting Principles and Cash Flows- Cash Essay

School: Generally Accepted Accounting Principles and Cash Flows Essay

INVESTING, AND FINANCING ACTIVITIES Operating Cash inflows From customers paying on account for the sale of goods or services. From customers for cash sales. From returns on loans (interest) and on equity securities (dividends). Cash outflows To suppliers on account for purchases of inventory and other goods and services. To or on behalf of employees for services and benefits. To government for taxes. To creditors for interest. Investing Cash inflows Proceeds on the sale of property,…

Words 1065 - Pages 5

Accounting: Generally Accepted Accounting Principles and Cash Accounting Essay

Accounting Rusty Stevenson Acc. 290 Andy Knowlton University of Phoenix March 28, 2013 Accounting Commercial accounting and generally accepted accounting principles, generally describe the accrual basis of accounting over the cash basis. The differences in accrual and cash accounting can become confusing. The ability to differentiate between the two is important in the accounting world. Accrual accounting is defined as an accounting method which, measures the performance…

Words 373 - Pages 2

Essay about Generally Accepted Accounting Principles and Balance Sheet

Chapter One Accounting and the Business Environment What is Financial Accounting?  Financial Accounting: The process of identifying, measuring and communicating economic (financial) information about a company, primarily to investors and creditors (existing or potential). Content of Financial Reports   The Management Letter The Financial Statements:       Balance Sheet Income Statement Statement of Shareholders’ Equity Statement of Cash Flows The Footnotes The Auditor’s Report 3…

Words 1096 - Pages 5

Discussion Financial Reporting Environment And GAAP

Environment and GAAP Generally Accepted Accounting Principles (GAAP) The role of generally accepted accounting principles (GAAP) in the preparation of financial statements is a set of guidelines that inform businesses how to properly record accounting information in a fair and consistent manner. “Is a rule” to meet that requirement, statements are prepared in accordance with GAAP, which encompasses the conventions, standards and procedures, necessary to define accepted accounting practice at a particular…

Words 440 - Pages 2

Financial Statements Essay

Financial Statements The main purpose of accounting is to identify, record, and communicate certain economic events so an organization can determine their financial status and make sound financial decisions. The events are summarized in four basic, but important, financial statements, balance sheet, income statement, retained earnings statement, and statement of cash flow. In this paper, the subject to discuss is the purpose of accounting, how the four statements are interrelated and how…

Words 793 - Pages 4

Essay on Chapter 2 Study Guide

meet unexpected needs for cash. Solvency ratios, such as the debt to total assets ratio, measure the ability of an enterprise to survive over a long period. 5. Use the statement of cash flows to evaluate solvency. Free cash flow indicates a company’s ability to generate cash from operations that are sufficient to pay debts, acquire assets, and distribute dividends. 6. Explain the meaning of generally accepted accounting principles. Generally accepted accounting principles are a set of rules and…

Words 3348 - Pages 14

ACC410 Karissa Johnson Week 5 Audit Report Modifications Essays

Modifications Karissa Johnson ACC410 Auditing Instructor: Brenda Forde November 18, 2013 Audit Report Modifications Audit report modifications are applied when the auditors come across a scope limitations, a deviation from generally accepted accounting principles, a problem with the application of methods, or deficient financial statement disclosures. At any time when the auditor conveys an opinion that is not qualified, a clear description of all the applicable reasons should be included…

Words 758 - Pages 4

Essay on Accounting Chapter 1

Accounting: * Is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities * Identifying business activities requires selecting transactions and events relevant to an organization. * Recording business activities requires keeping a chronological log of transactions and events measured in dollars and classified and summarized in a useful format. * Communicating business…

Words 1776 - Pages 8

Business Decisions And Financial Accounting

Accounting 100 Chapter 1: Business Decisions and Financial Accounting Chapter 1 Key Points The Basic Business Activities The Three Forms of Business Ownership The Basic Accounting Equation The Financial Statements – The Basic Components The Relationship Between the Financial Statements Operating Activities Investing Activities Financing Activities Sole Proprietorship – Business organizations owned by one person. The owner often is personally liable for business debts that cannot…

Words 836 - Pages 4

ACCT444 WK7 HW7 Mk Essay

comparative financial statements.(Both years' statements will be referred to in the audit report.) 2. Specific description of the change in method of accounting for long-term construction contracts need not be included in the report since it is discussed in the footnotes. But, the auditor's report must state that there is a change in accounting principles and refer to the footnote. 3. The fact that normal receivable confirmation procedures were not used should not be disclosed since the auditor was able…

Words 1648 - Pages 7