Chapter 1 :)

Question 1

What is an income statement called on an annual report?

Answer 1

The statement of earnings or operations

Question 2

What does an income statement/statement of earnings/operations do?

Answer 2

It measures the operational performance of a company

Question 3

What is a Net Income?

Answer 3

Revenue > Expenses

Question 4

What is a Net Loss?

Answer 4

Revenue < Expenses

Question 5

Define Revenue

Answer 5

Money or other Assets earned for the performance of a service and/or shipment of a product; could also be immediate cash flow if the earning process is complete

Question 6

What is an Expense?

Answer 6

Goods/services consumed in operating a business; An expenditure that will benefit one month or less; recurring anticipated systematic expirations; do not posses future value

Question 7

What are Gains or Income?

Answer 7

Arising from passive activity; considered as secondary or peripheral activities

Question 8

Are Gains/Income the same as Revenue? What does this change?

Answer 8

No! This means Gains/Income should be separated from revenue on the income statement

Question 9

What are Losses?

Answer 9

Premature unanticipated extinguishment; considered as secondary/peripheral activities

Question 10

Are Losses the same as Expenses? What does this change?

Answer 10

No! This means Losses should be separated from Expenses on the income statement

Question 11

What are amounts owed to creditors (in terms of debt or other obligations) called?

Answer 11

Liabilities

Question 12

What’s are common words used that signals a Liability?

Answer 12

Payable, debt, obligation

Question 13

What are debt securities sold to investors that must be repaid at a particular point in the future called?

Answer 13

Bonds Payable

Question 14

What is Common Stock?

Answer 14

The total amount paid in by stockholders for the shares they purchase

Question 15

If I loan money to a company I’m a…

Answer 15

Creditor

Question 16

How are creditors different from stockholders?

Answer 16

The Creditors expect to be paid back on time, and can force a company to sell property if they’re late. Stockholder’s shouldn’t expect money given to them until the company has satisfied creditor claims

Question 17

In what order are creditors and stockholders paid?

Answer 17

Creditors, then stockholders.

Question 18

What are the cash payments given to stockholders called?

Answer 18

Dividends

Question 19

Do companies give out dividends even if they haven’t paid off their creditors?

Answer 19

Some do! Some do so as long as they have enough money to cover their creditors

Question 20

What is the definition of an Asset?

Answer 20

A [financial] resource owned by the company; an expenditure that benefits more than one accounting period (month); has future value; and may expire over the normal course of business

Question 21

What is an Asset called after it expires over the normal course of business?

Answer 21

An Expense

Question 22

What do companies do with cash once they’ve raised it through financing activities?

Answer 22

They use it in investing activities

Question 23

What does it mean when a company does investing activities?

Answer 23

It involves the purchase of resources a company needs to operate

Question 24

In this specific instance of a company acquiring resources through investing activities, what are these resources called?

Answer 24

Assets!

Question 25

A company owns a computer, this computer is a...

Answer 25

Supply and an Asset

Question 26

A company owns a building, this building is a...

Answer 26

Asset

Question 27

A company owns delivery trucks, these are considered...

Answer 27

Assets

Question 28

A company owns furniture, which are considered...

Answer 28

Assets

Question 29

What is cash?

Answer 29

An asset

Question 30

What are investments considered?

Answer 30

Assets

Question 31

What is an investment?

Answer 31

When a company invests in another's stocks or bonds

Question 32

What is the amount earned from the sale of a product called?

Answer 32

Revenue

Question 33

What is Revenue?

Answer 33

The increase in assets or decrease in liabilities resulting from the sale of goods or the performance of services in the normal course of business

Question 34

What are three different kinds of revenue?

Answer 34

Sales Revenue, Interest Revenue, and Service Revenue

Question 35

What are Supplies?

Answer 35

Assets used in day-to-day operations (rather than sold to customers).

Question 36

What are supplies considered?

Answer 36

Assets

Question 37

Goods available for future sales to customers are...

Answer 37

...assets called inventory.

Question 38

What is an Account Receivable?

Answer 38

The right to receive money in the future

Question 39

If a company sells something to a costumer, and they don't pay right away, what can the company expect?

Answer 39

To be paid in the near future

Question 40

What is it called when a company sells something to someone and can expect to be paid soon?

Answer 40

An Account Recievable

Question 41

What are expenses?

Answer 41

They're costs neccesary to produce and sell a product

Question 42

What are salaries considered?

Answer 42

An Expense

Question 43

What is the cost of utilities called?

Answer 43

An Expense

Question 44

What is the cost of rent called?

Answer 44

An Expense

Question 45

What are expenses in accounting language?

Answer 45

The cost of assets consumed or services used in the process of generating revenues.

Question 46

What are the different types of expenses named after?

Answer 46

The type of asset consumed or service used.

Question 47

The cost of materials are filed as...

Answer 47

Costs of Goods Sold

Question 48

The cost of a salespersons' salaries can be filed as...

Answer 48

Selling Expenses

Question 49

The cost of advertising can be filed as...

Answer 49

Advertising Expenses

Question 50

The cost of the salaries of administrative staff, and telephone and heating costs incurred at the corporate office can be filed as...

Answer 50

Administrative expenses

Question 51

The cost of the amounts of interest paid on various debts can be filed as...

Answer 51

Interest expenses

Question 52

The cost of the corporate taxes paid to the government can be filed as...

Answer 52

Income Tax expenses

Question 53

What are the company's short-term obligations owed to its creditors or suppliers, which have not yet been paid called?

Answer 53

Accounts Payable

Question 54

What can arise from expenses?

Answer 54

Liabilities/Obligations!

Question 55

If a company buys goods from a supplier on credit and hasn't paid yet, what is the obligation to pay this amount called?

Answer 55

Accounts Payable

Question 56

What are Accounts Payable on the Balance Sheet?

Answer 56

Current Liabilities

Question 57

If a company has interest on an outstanding amount from the bank it's called...

Answer 57

Interest Payable

Question 58

What is the kind of liability/obigation to employees ad wages?

Answer 58

Wages Payable

Question 59

What are three types of obligations to the government? What's a way to remember this?

Answer 59

Sales Taxes Payable, Property Taxes Payable, and Income Taxes Payable--SIP

Question 60

What happens when revenues exceed expenses?

Answer 60

Net Income

Question 61

What happens when expenses exceed revenues?

Answer 61

Net Loss

Question 62

What does an Income Statement do?

Answer 62

Shows how successfully your business performed during a period of time, by subtracting expenses from revenues.

Question 63

What does a Retained earnings statement do?

Answer 63

It indicates how much of previous income was distributed to owners of your business in the form of dividends, and how much was retained in the business to allow for future growth.

Question 64

What does a Balance Sheet do?

Answer 64

It presents a picture at a point in time of what your business owns (its assets) and what it owes (its liabilities).

Question 65

What does a Statement of cash flows do?

Answer 65

It shows where your business obtained cash during a period of time and how that cash was used.

Question 66

What does an Income Statement show?

Answer 66

A company’s revenues and expenses and resulting net income or loss for a period of time

Question 67

What can the Income Statement help people to determine?

Answer 67

If a company's operations are profitable

Question 68

Stocks and dividends aren't on Income Statements, why?

Answer 68

Becuase money earned from stocks aren't Revenue and Dividends paid out are not expenses