1.0 Financial Statements

Question 1

Name 8 Useful Financial Statement Requirements

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Answer 1

• Relevant
• Faithful Representation
• Comparability
• Consistency
• Timeliness
• Verifiability
• Understandability
• Going Concern Assumption

Question 2

Name 4 external users of financial accounting data

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Answer 2

Suppliers
Creditors
Investors
Regulatory Agencies

Question 3

Name 5 Financial Statements and which accounts feed the next in order.

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Answer 3

1. Income Statement - ending balance = retained earnings
2. Statement of comprehensive income
3. Statement of changes in Equity or Statement of Stockholder Equity - ending balance = Balance sheet
4. Balance Sheet = Ending balance = Statement of Cash Flows
5. Statement of cash flows = Balance Sheet

Question 4

When is accrual accounting required and by whom?

Answer 4

All publicly traded companies are required to follow GAAP

Question 5

What does a balance sheet tell you about a company?

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Answer 5

○ Assess liquidity
§ Economic Resources (Assets) - Economic Liabilities (or obligations)
○ Financial flexibility
○ Efficiency with which assets are used
○ Capital structure
Risk

Question 6

What time frame reflects current assets and current liabilities

Answer 6

Expected to receive or be paid within 12 months. Can be a portion of a long term note.

Question 7

is this current or long term on the balance sheet:
Deferred revenue

Answer 7

long-term lability

Question 8

is this current or long term on the balance sheet? 2 year notes payable

Answer 8

1 year of interest payable is current liability
the rest are long term liabilities

Question 9

What kind of items are included under Accumulated other comprehensive income

Answer 9

Accumulated other comprehensive income (OCI) includes unrealized gains and losses reported in the equity section of the balance sheet that are netted below retained earnings. Other comprehensive income can consist of gains and losses on certain types of investments, pension plans, and hedging transactions.

Question 10

Where do you record items of financial value but not able to identify the value within reason?

Answer 10

The balance sheet omits many items that cannot be recorded objectively but have financial value to the company.

Question 11

Which statement can be used for Information about economic resources and claims helps to evaluate liquidity, solvency, financing needs, and the probability of obtaining financing.

Answer 11

All 4

Question 12

What is IFRS?

Answer 12

International Financial Reporting Standards (IFRS)

Question 13

Where do you describe significant accounting policies, estimates and assumptions?

Answer 13

The first footnote accompanying any set of complete financial statements is generally one describing significant accounting policies, such as the use of estimates and assumptions, and policies relating to, among others, revenue recognition and allocation of asset (tangible and intangible) costs to current and future periods.

Question 14

what is included in statement of comprehensive income not included on the income statement?

Answer 14

Unrealized losses and gains that can be reasonably estimated.