Chapter 1 Introduction to Financial Accounting

Question 1

What are the three types of business activities?

Answer 1

1. Operating
2. Financing
3. Investing

Question 2

What are the two perspectives of accounting?

Answer 2

1. Management Accounting
   - Internal Reporting Only
   - Does not need to follow any accounting standards
2. Financial Accounting
   - External reporting
   - Has to follow regulations, for Singapore it will be the SFRS

Question 3

What is the accounting equation?

Answer 3

Assets = Liabilities + Owner’s Equity

Question 4

What is the formula for net income?

Answer 4

Income - Expenses

Question 5

What is the formula for equity?

Answer 5

Share Capital + Retained Earnings

Question 6

How do you solve for ending retained earnings?

Answer 6

Beginning Retained Earnings + Net Income = Ending Retained Earnings