Chapter 1 - Finacial Statements

Question 1

What are the 4 basic financial accounting statements?

Answer 1

Statement of Stockholder’s Equity, Income Statement, Balance Sheet, Statement of Cash Flows

Question 2

4 elements of a Sttement of Stockholder’s Equity

Answer 2

Name of the entity
Title of the report
Period of time (Accounting Period)
Unit of measure ($)

Question 3

What is the retained earnings equation?

Answer 3

Beginning Retained Earnings + Net Income - Dividends - Ending Retained Earnings

Question 4

Compute ending retained earnngs given 
beginning retained earnings of  $5,510, 
total assets of $20,450
dividends of $900 
COGs of $19,475
Net Income $1,780

Answer 4

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

$5,510 + $1,780 - $900 = $6,390

Question 5

What is the purpose of the Statement of Cash Flows?

Answer 5

The purpose of the Statement of Cash Flows is to divide the cash inflows and outflows (receipts and payments) into three primary categories of cashflows: Operating, Investing, and Financing.

Question 6

Do reported revenues always equal cash collected from customers?

Answer 6

Reported revenues do NOT always equal cash collected from customers because of sales on credit

Question 7

If a company collects $250M in cash from customers and $275.1M payments or promises to pay which figure is shown on a cash flow statement for the period?

Answer 7

A company recognizes the $250M - only the actual cash collected from customers on its cash flow statement

Question 8

Net Income from which statement results in what on which statement?

Answer 8

Net income from THE INCOME STATEMENT results in an increase in ENDING RETAINED EARNINGS on the STOCKHOLDERS’ EQUITY STATEMENT

Question 9

What 3 elements constitute the Total Liabilities & Stockholder’s Equty on which statement

Answer 9

Total Liabilities & Stockholder’s Equity is constituted by LIABILITIES, COMMON STOCK and RETAINED EARNINGS (From the Statement of Stockholders’ Equity) and is listed on the BALANCE SHEET

Question 10

A - B = C represent what 3 sections of the Income Statement?

Answer 10

The income statement is constituted by REVENUES - EXPENSES = NET INCOME

Question 11

The Purpose of the Balance Sheet is?

Answer 11

The purpose of the Balance Sheet is to provide a Statement of Financial Position (economic resources and sources of financing of an accounting entity at a point in time)

Question 12

The purpose of the income statement is?

Answer 12

The purpose of the Income statement is to report the Accountants primary measure of economic performance during the accounting period

Question 13

The purpose of the Statement of Cash Flows is?

Answer 13

The purpose of the statement of cash flows is to report the cash inflows (receipts) and outflows (payments) for the accounting period in the categories of operating, financing and investing

Question 14

The purpose of the Statement of Stockeholder’s Equity is?

Answer 14

The purpose of the Statement of Stockholder’s Equity is to report changes in the company’s common stock and retained earnings during the accounting period

Question 15

Provide 1 example of a Shareholders’ Equity Item?

Answer 15

Shareholders’ equity items include:

retained earnings

Question 16

Provide 4 examples of liabilities?

Answer 16

Liabilities include:

Bank Loans
Accounts Payable
Dividends Payable
Income Taxes Payable

Question 17

Provide 4 examples of expenses?

Answer 17

Expenses include:

Selling, marketing, and administrative costs
Provision for income taxes
Product cost of goods sold
Rental and royalty costs

Question 18

Provide 8 examples of assets?

Answer 18

Examples of assets include:

Cash and cash equivalents
Accounts receivable
Machinery and Equipment 
Inventories 
Trademarks 
Buildings 
Land
Investments (In other companies)