Exam 1, Chapter 1 - Concepts

Question 1

Equation:

Assets

Answer 1

Assets = Liabilities + Equites

Question 2

Define:

Assets

Answer 2

Resources to benefit a company that a company controls

Something that you have right now that you will benefit from in the future

Question 3

Define:

Liabilities

Answer 3

Debts owed to creditors, creditors claim to a business

Question 4

Define:

Equity

Answer 4

Owner’s claim to assets

Question 5

Answer:

Equity increases with ___(a)___ and ___(b)___.

Answer 5

a. Capital contribution

b. Revenue

Question 6

Answer:

Equity decreases with ___(a)___ and ___(b)___.

Answer 6

a. Expenses

b. Distributions to owners

Question 7

Equation:

Income Statement

Answer 7

Net Income/Loss = Revenues - Expenses

Question 8

Answer:

The net income/loss used on the ___(a)___ is obtained from the ___(b)___

Answer 8

a. Statement of retained earnings

b. Income Statement

Question 9

Equation:

Statement of Retained Earnings

Answer 9

Retained Earnings = Net Income/Loss - Dividends

Question 10

Equation:

Balance Sheet

Answer 10

Assets = Liabilities + Equity (shareholder equity)

Question 11

Equation:

Statement of Cash Flows

Answer 11

Cash Receipts + Cash Payments

Question 12

List:

4 Financial statements required by SEC

Answer 12

1. Balance Sheet
2. Income Statement
3. Statement of Shareholder Equity
4. Statement of Cash Flows

Question 13

List:

3 Elements of a Balance Sheet

Answer 13

1. Assets
2. Liability
3. Shareholders’ Equity

Question 14

Answer:

Regarding the balance sheet, every year the total ___(a)___ must be equal to ___(b)___

Answer 14

a. Assets

b. Total Liabilities plus Shareholders’ Equity

Question 15

Answer:

In the income statement, the company tells you ___(a)___, ___(b)___, and ___(c)___

Answer 15

a. How much revenue they earned last year
b. How much expense occurred last year
c. What was the net income (positive or negative)

Question 16

Answer:

In the statement of shareholders’ equity, the company tells you ______

Answer 16

about any changes in shareholders’ interest

Question 17

Answer:

The balance sheet is a ___(a)___ of the company’s ___(b)___ at a given ___(c)___

Answer 17

a. snapshot
b. financial position
c. point in time

Question 18

Answer:

On the balance sheet, all of the assets and liabilities have to be listed in order of ______

Answer 18

liquidity

Question 19

Define:

Liquidity

Answer 19

How quickly a certain item can be converted into cash

Question 20

Answer:

What is the most liquid asset?

Answer 20

cash

Question 21

List:

Subsections of assets on the balance sheet

Answer 21

1. current assets

2. Non current assets

Question 22

List:

Subsections of liabilities on the balance sheet

Answer 22

1. current liabilities

2. Non current liabilities

Question 23

Answer:

On the balance sheet, ___(a)___ have to be listed in front of ___(b)___, and ___(c)___ have to be listed ahead of ___(d)___

Answer 23

a. current liabilities
b. concurrent liabilities
c. current assets
d. concurrent assets

Question 24

Answer:

On the balance sheet, the left side of the equation, the ___(a)___ represent all the ___(b)___

Answer 24

a. assets

b. economic resources the company has right now

Question 25

Answer: The right hand side of the balance sheet tells you ________

Answer 25

the source of the company's assets

Question 26

Answer: Shareholder equity is also called ___(a)___ or ___(b)___

Answer 26

a. net asset | b. residual interest

Question 27

# Define: Residual Interest

Answer 27

The remainder of assets after liquidation (ex - bankruptcy). Shareholders can claim the residual interest

Question 28

# Define: Accounts Receivable

Answer 28

Claims held against customers and others for money for goods or services Asset

Question 29

Asset/Liability/Expense: Accounts receivable

Answer 29

Asset because it is a claim to cash in the future

Question 30

# Define: Prepaid Expense

Answer 30

Payment made for goods or services prior to receiving the goods or services

Question 31

Asset/Liability/Expense: Prepaid Expense

Answer 31

Asset because it gives you the title to enjoy the goods or services in the future

Question 32

List: Examples of Non-Current Assets

Answer 32

1. Long Term Investments 2. Property 3. Plant 4. Equipment 5. Intangible Asset

Question 33

# Define: Non-Current Asset

Answer 33

Asset that will give you a benefit for longer than one (1) year, for example, you use equipment for longer than a year

Question 34

List: Types of Liabilities

Answer 34

1. Current Liabilities | 2. Long Term Liabilities (non current)

Question 35

# Define: Current Liabilities

Answer 35

Liabilities that must be paid off within the current year or within one (1) year

Question 36

# Define: Long Term Liabilities

Answer 36

Liabilities you expect to pay off over a period of time, beyond the current year

Question 37

Asset/Liability/Expense: Deferred Revenue

Answer 37

Liabilities because the goods or services are unearned Ex - deposit for catering services prior to catering event, the deposit is deferred revenue and is a liability until the service is performed and the revenue is earned. It is a service owed

Question 38

# Define: Deferred Revenue

Answer 38

Revenue that has not yet been earned, such as a deposit for a service before the service has been earned Also known as unearned revenue It is a liability

Question 39

Answer: What is another term for deferred revenue?

Answer 39

Unearned revenue

Question 40

Answer: The statement of shareholders' equity records ______

Answer 40

any changes in shareholders equity

Question 41

Answer: Issuing stock is an example of ___(a)___ because you are ___(b)___ which will ___(c)___

Answer 41

a. a change in shareholders' equity b. actually inviting new shareholders to the company c. increase the total shareholders interest in the company

Question 42

Answer: If you earn net income, which is ___(a)___ you ___(b)___ shareholder interest

Answer 42

a. positive | b. increase

Question 43

Answer: If you pay dividends, ___(a)___ are happy, however it will ___(b)___ their interest in the company, so we prepare the financial statement from the perspective of the ___(c)____

Answer 43

a. individual shareholders b. decrease c. company

Question 44

Answer: Dividends only appear on which type of financial statement?

Answer 44

Statement of Shareholders' Equity

Question 45

Answer: Income statement shows the company's ___(a)___ over a ___(b)___

Answer 45

a. performance | b. period (quarter, year, etc.)

Question 46

List: Four Title Elements of Income Statement

Answer 46

1. Revenue 2. Expenses (from major operations) 3. Gains and Losses (from miscellaneous) 4. Accidental Transactions

Question 47

Answer: On the income statement, expenses are from ______

Answer 47

the major operations

Question 48

Answer: On the income statement, gains and losses are from ______

Answer 48

the miscellaneous

Question 49

Answer: The income shown on the income statement could be ___(a)___ or ___(b)___

Answer 49

a. positive | b. negative

Question 50

Answer: The statement of cash flows provides information about ___(a)___ and all of the information on the statement is about ___(b)___

Answer 50

a. cash | b. cash

Question 51

Asset/Liability/Equity: Cash

Answer 51

Asset

Question 52

Answer: The statement of cash flows explains the differences in ___(a)___ between ___(b)___ and ___(c)___

Answer 52

a. cash b. last year c. this year

Question 53

Answer: Because cash is a/an ___(a)___, it is part of the ___(b)___, so the ___(c)___ and the ___(d)___ are connect to on another

Answer 53

a. asset b. balance sheet c. balance sheet d. statement of cash flows

Question 54

Answer: The statement of shareholders' equity contains a ___(a)___, which is directly borrowed from the ___(b)___

Answer 54

a. net income number | b. income statement

Question 55

Answer: The statement of shareholders' equity explains any changes in ___(a)___, and that information is also reflected in the ___(b)___ of the ___(c)___

Answer 55

a. shareholder interest b. equity section c. balance sheet

Question 56

I solemnly swear I am up to no good

Answer 56

Mischief managed