FAR (midterms) Flashcards
Use to help transfer data from the unadjusted trial balance to the financial statements/ efficient way to summarize the data for financial statements.
worksheet
profit or loss? Debit column of the income statement and credit column of the balance sheet.
profit
presents a summary of the changes in capital such as investments, profit or loss, and withdrawals during a specific period.
The statement of changes in equity
Reports the amount of cash received and disbursed during the period.
The statement of cash flows
refers to the availability of cash in the near future after taking account of the financial commitments over this period
Liquidity
The ability to take effective actions to alter the amounts and timings of cash flows so that it can respond to unexpected needs and opportunities/ability to raise new capital or tap into unused lines of credit.
Financial flexibility
refers to the availability of cash over the longer term to meet financial commitments as they fall due
solvency
provides information about the cash receipts (inflows) and cash payments (outflows) of an entity during a period into operating, investing and financing activities.
Statement of cash flows
Statement that shows the net increase or decrease in cash during the period and the cash balance at the end of the period. also project the future net cash flows of the entity.
Statement of cash flows
The cash effects of transactions and other events that enter into the determination of profit and loss. Generally involve providing services, and producing and delivering goods.
Cash flows from operating activities
recognize revenue when EARNED and expenses when INCURRED.
Accrual basis
expenses ALREADY PAID but not yet INCURRED (asset to expense)
Prepaid expenses
revenues ALREADY COLLECTED but not yet EARNED (Liability to income)
Unearned revenues
revenues already EARNED but not yet COLLECTED (assets to income)
Accrued revenues
expenses already INCURRED but not yet PAID (expenses to liabilites)
Accrued expenses
True or false? When the reduction in prepaid expenses is not properly recorded this causes the asset accounts and expense accounts to be understated.
False
True or false? The owner’s personal withdrawals for the year cause a decrease in profit
False
True or false? The account Wages Payable appear on the income statement?
False
True or false? The balance sheet may be prepared by referring solely to the balance sheet columns of the worksheet?
False
True or false? The Income summary account will appear on the post closing trial balance
False
True or false? The balances of all the accounts that appear on a balance sheet are the same on the adjusted trial balance as they are on a post-trial balance.
False
True or false? Closing entries result in the transfer of profit or loss into the owner’s Capital account.
True
True or false? The adjusting entry to recognize earned revenues which was received in advance will cause total liabilities to decrease.
True
True or false? When the reduction in prepaid expenses is not properly recorded this causes the asset accounts and expenses accounts to be understated.
False
True or false?
In recording the adjusting entries for depreciation, both accounts involved are increased.
True
True or false?
The amount placed opposite the owner’s Capital account in the Balance Sheet columns of the worksheets is the amount to be reflected for the owner’s Capital on the balance sheet.
False
True or false?
Total assets, total liabilities and owner’s equity on the balance sheet are the same as the totals of the Balance Sheet columns on the worksheet.
False
When an entity has suffered a loss, the loss amount is entered on the worksheet on the
Credit side of the Income statement columns and the debit side of the Balance sheet columns
Adjusting entries are required
every time financial statements are prepared
