Financial statements

Question 1

What is a balance sheet?

Answer 1

An overview of the financial situation of a company at a particular moment in time

Question 2

What are balance sheet mutations?

Answer 2

Each financial transaction that influences the balance sheet

Question 3

What are assets?

Answer 3

Resources that a company owns, displayed on the debit side of balance sheet, you always put them from highest to lowest

Question 4

What are non-current / fixed assets?

Answer 4

These can be used more than once. E.g.: cars, equipment, buildings, etc.

Question 5

What are current assets?

Answer 5

Can only be used once. E.g.: inventory

Question 6

Name a few financing sources on the credit side:

Answer 6

Equity
Non-Current liabilities
Current liabillities

Question 7

What is equity?

Answer 7

Amount of money that the owners have invested in the company

Question 8

What are non-current liabilities:

Answer 8

Long term financial obligations of the company to others (long term loan/mortgage)

Question 9

Current liabilities:

Answer 9

Short term obligations, amounts the company still needs to pay to the owner, trade payables, short term (within one year)

Question 10

What is an equilibrium?

Answer 10

When the credit and debit sides are equal

Question 11

Finish the sentence: assets are…

Answer 11

Equity + liabilities

Question 12

Accounts receivable. Debit or credit?

Answer 12

Debit

Question 13

Accounts payable. Debit or credit?

Answer 13

Credit

Question 14

The equity increases when (2):

Answer 14

1. There is a direct investment by the owner

2. There is reinvestment of the profit in the business

Question 15

The equity decreases when (2):

Answer 15

1. Direct capital withdrawal by the owner

2. Business realizes a loss

Question 16

How is depreciation calculated?

Answer 16

(value - scrap value) / amount of periods

Question 17

What is redemption?

Answer 17

Paying back money that you borrowed (= paying back a loan)

Question 18

What are receivables?

Answer 18

When you don’t receive the cash yet but do deliver the product already

Question 19

What is pre-paid?

Answer 19

When you have paid for something already

Question 20

What is an income statement?

Answer 20

Shows the revenues and expenses over a certain period of time

Question 21

What are revenues?

Answer 21

Monetary value of goods and services sold

Question 22

What are expenses?

Answer 22

Monetary value of production means used

Question 23

What is cash basis accounting?

Answer 23

Only recognizes a transaction when you spend or receive money (e.g. when you cash a check) this form of accounting is better if you deal with customers and have a lot of transactions

Question 24

What is accrual basis accounting?

Answer 24

Recognizes a transaction when money is earned but not exchanged (e.g. sending an invoice) this method is best if you deal with large businesses and don’t always get paid right away

Question 25

What is depreciation?

Answer 25

The loss of value of tangible fixed assets. This is an expense because you used the asset and now it is worth less, depreciation is never a payment

Question 26

Name a few examples of expenses:

Answer 26

1. Cost of goods sold
2. Operating expenses
3. Financing expenses
4. Income tax

Question 27

What is cost of goods sold:

Answer 27

Cost of producing or acquiring the goods or services sold

Question 28

What are operating expenses:

Answer 28

Expenses related to the operations of the company like: selling, general & administrative expenses, salaries, rent, property, taxes, depreciation

Question 29

What is gross profit?

Answer 29

The difference between revenue and cost of goods sold

Question 30

What are receipts?

Answer 30

All the money that flows into the firm over a certain period

Question 31

What are payments?

Answer 31

All the money that flows out of the firm over a certain pariod

Question 32

What is Net Cash Flow?

Answer 32

Difference between cash receipts and cash payments