Accounting

Question 1

What is accounting ?

Answer 1

Accounting is the measuring, classifying, analyzing,
and communicating of financial information to help
people inside and outside a company make good
financial decisions.

Question 2

What are the 3 basic financial statement?

Answer 2

– Balance Sheet (also called
Statement of Financial Position)
– Income Statement
– Statement of Cash Flows
(will not be covered)

Question 3

What is a balance sheet ?

Answer 3

basically it is what do we own and how did we get it?
- Summarizes a firm’s financial position at a specific
point in time.

Question 3

what compose a balance sheet?

Answer 3

Assets = Liabilities + Owner’s Equity
-Assets: things of value that the firm owns
- Liabilities: indicates what the firm owes to non-owners (creditors)
- Owner’s
Equity: is the amount of your investment
plus earnings (owner’s investment)

Question 4

what is the income statement ?

Answer 4

Basically it is about how much profit did we make? Summarizes a firm’s operations over a given period of
time in terms of profit and loss.

Question 5

what compose a income statement ?

Answer 5

Revenues – Cost of goods sold = Gross profit
Gross profit – Operating/Other expenses = Net income

Question 6

Financial vs managerial accounting ?

Answer 6

Managerial accounting:
- the firm manager - the firm employees
Financial accounting:
- Stockholders
- Lenders
- Suppliers
- Government agencies