Financial Statement Analysis

Question 1

12-month reporting period chosen by management; does not have to coincode with the calendar year ending December 31

Answer 1

Fiscal Year

Question 2

IASB

Answer 2

International Accounting Standards Board

Question 2

Accrual Accounting

Answer 2

Revenues are recorded when earned, regardless of when case is collected

Question 2

Double Entry System

Answer 2

Where there are two sides to every transaction. When any transaction is entered into an accounting system, there must be at least two accounts affected (or more), one side for each side of the transaction.

Question 2

debits and credits

Answer 2

“left side” and “right side”, used as a reference to the left and right sides of an equation, the left side must equal the right side, or the debits must equal the credits

Question 2

US GAAP

Answer 2

Generally Accepted Accounting Principles in the US

Question 3

IFRS

Answer 3

International Financial Reporting Standards - IASB’s accounting standards; accepted in most of the world’s major economy

Question 3

Accounting Equation

Answer 3

The underlying basis of the statement of financial position or balance sheet. The equation is as follows
asset = liabilities + owner’s equity

Question 3

Matching principle

Answer 3

Requires revenue to be matched or recorded with the expenses related to generating those revenues

Question 4

FASB

Answer 4

Financial Accounting Standards Board - they issue the US GAAP

Question 4

How do each of the different types of account increased with debits and credits?

Answer 4

Accounts Debits Credits
Assets Increase Decrease
Liabilities Decrease Increase
Owner’s Equity Decrease Increase
Revenues, Gains Decrease Increase
Expenses, Losses Increase Decrease

Question 5

Accounts Receivable

Answer 5

When a firm does not collect cash at the time of sale, the firm creates accounts receivable