A explain the relationship of financial statement elements and accounts, and classify accounts into the financial statement elements;

Question 1

Explain the relationship of financial statement elements and accounts

Answer 1

Financial statement elements are the major classifications of assets, liabilities, OE, R, E

Accounts are where financials transactions are entered into the element

Contra accounts offset some part of the value of another account

Question 2

Classify accounts as elements

Answer 2

Assets
Liabilities
Owners Equity
Revenues
Expenses

Question 3

Assets: A firms economic resources

Answer 3

Cash, accounts receivable, Allowance for doubtful accounts, interest receivable, inventory, supplies, prepaid insurance, prepaid rent, land, equipment, accumulated Depreciation expense, buildings, accumulated depreciation Buildings, copyright, goodwill, patent

Question 4

Cash and Cash Equivalents

Answer 4

Liquid securities with maturities of 90 days or less

Question 5

Accounts Recievable

Answer 5

“Amounts customers owe the company for
products that have been sold as well as amounts that may be due from suppliers (such as for returns of merchandise). Also called commercial receivables or trade receivables.”

Question 6

Inventory

Answer 6

“The unsold units of product on hand.”

Question 7

Financial Assets

Answer 7

.

Question 8

Prepaid Expenses

Answer 8

Items that will be expenses on future income statements

Question 9

Property, Plant, and Equipment

Answer 9

“Tangible assets that are expected to be used for more than one period in either the production or supply of goods or services, or for admin- istrative purposes.”

Question 10

Investment in affiliates

Answer 10

.

Question 11

Deferred Tax assets

Answer 11

“A balance sheet asset that arises when an excess amount is paid for income taxes relative to account- ing profit. The taxable income is higher than accounting profit and income tax payable exceeds tax expense. The company expects to recover the difference during the course of future operations when tax expense exceeds income tax payable.”

Question 12

Intangible assets

Answer 12

Economic resources of the firm that do not have a physical form, such as patens ,trademakrs, licenses, and goodwill. Except for goodwill, these values may be reduced by “accumulated amortization.”

Question 13

Liabilities Accounts: Creditor claims on the company’s resources

Answer 13

Notes Payable, accounts payable, unearned service revenue, salaries and wages payable, interest payable, dividends payable, income taxes payable, bonds payable, discount on bonds payable, premium on bonds payable, mortgage payable

Question 14

Accounts payable and trade payables

Answer 14

“Amounts that a business owes to its vendors
for goods and services that were purchased from them but
which have not yet been paid.”

Question 15

Financial Liabilities

Answer 15

.

Question 16

Unearned Revenue

Answer 16

Items that will show up on future income statements as revenues

Question 17

Income taxes payable

Answer 17

The taxes accrued during the past year but not yet paid

Question 18

Long-term debt

Answer 18

Bonds payable

Question 19

Deferred tax liabilities

Answer 19

“A balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit. The taxable income is less than the accounting profit and income tax payable is less than tax expense. The company expects to eliminate the liability over the course of future operations when income tax payable exceeds tax expense.”

Question 20

Owners Equity: The owners’ residual claim on a firm’s economic resources, which is the amount by which assets exceed liabilities

Answer 20

Common stock, paid-in capital in excess of par value-common stock, preferred stock, paid in capital in excess of par value-preferred stock, Treasury stock - common, retained earnings, dividends, income summary

Question 21

Capital

Answer 21

Par value of common stock

Question 22

Wtf is “par value” of common stock?

Answer 22

“The amount of principal on a bond.”

Question 23

Additional paid-in capital

Answer 23

Proceeds from common stock sales in excess of par value

Question 24

Retained Earnings

Answer 24

Cumulative net income that has not been distributed as dividends

Question 25

Other comprehensive income

Answer 25

Changes resulting from foreign currency translation, minimum pension liability adjustments, or unrealized gains and losses on investments.

Question 26

Revenue: Inflows of economic resources

Answer 26

Service revenue, sales revenue, sales discounts, sales returns and allowances, interest revenue, Gain on Disposal of Plant Assets

Question 27

Sales

Answer 27

Revenue from day to day activities

Question 28

Gains

Answer 28

Increases in assets from transactions incidental to the firm’s day-to-day activities.

Question 29

Investment Income

Answer 29

Interest and Dividend income

Question 30

Expenses: Outflows of economic resources

Answer 30

Administrative expenses, amortization expense, bad debts expense, COGS expense, Depreciation Expense, Freight-out, Income Tax Expense, Insurance Expense, Loss on Disposal of Plant Asset, Maintenance and Repairs Expense, Rent Expense, Salaries and Wages expense, Supplies expense, Utilities expense

Question 31

Cost of Goods Sold

Answer 31

“For a given period, equal to beginning inventory minus ending inventory plus the cost of goods acquired or produced during the period.”

Question 32

Selling, General, and administrative expenses

Answer 32

advertising, management salaries, rent, utilities

Question 33

Depreciation and amortization

Answer 33

To reflect the ‘using up’ of tangible and intangible assets

Question 34

Tax Expense

Answer 34

“An aggregate of an entity’s income tax payable (or
recoverable in the case of a tax benefit) and any changes in deferred tax assets and liabilities. It is essentially the income tax payable or recoverable if these had been determined based on accounting profit rather than taxable income.”

Question 35

Interest Expense

Answer 35

Payment for borrowing funds

Question 36

Losses

Answer 36

Decreases in assets from transactions incidental to the firm’s day-to-day activities.