fundamentals of accounting Flashcards
for final exam
What is an income statement?
A financial statement that shows a company’s revenues and expenses over a specific period.
True or False: The income statement is also known as the profit and loss statement.
True
Fill in the blank: The primary purpose of an income statement is to show the __________ of a company.
profitability
What are the main components of an income statement?
Revenues, expenses, and net income.
What does net income represent?
The total revenue minus total expenses.
Multiple Choice: Which of the following is NOT included in an income statement? A) Revenues B) Assets C) Expenses D) Net Income
B) Assets
What is the statement of financial position also known as?
The balance sheet.
True or False: The statement of financial position reports a company’s financial position at a specific point in time.
True
Fill in the blank: The statement of financial position includes __________, liabilities, and equity.
assets
What are the three main sections of the statement of financial position?
Assets, liabilities, and shareholders’ equity.
What is the accounting equation represented in the statement of financial position?
Assets = Liabilities + Equity.
Multiple Choice: Which of the following is classified as a liability? A) Cash B) Accounts Payable C) Inventory D) Retained Earnings
B) Accounts Payable
What does ‘current assets’ refer to?
Assets that are expected to be converted into cash or used within one year.
True or False: Long-term liabilities are obligations that are due within one year.
False
Fill in the blank: The __________ statement provides information about the performance of a company over a period of time.
income
What is an example of an operating expense?
Rent, utilities, or salaries.
Multiple Choice: Which of the following is typically the first item listed on an income statement? A) Expenses B) Revenues C) Net Income D) Cost of Goods Sold
B) Revenues
What is the purpose of a related earnings statement?
To provide detailed information about the earnings of a company in relation to its financial performance.
True or False: Earnings statements are only relevant for publicly traded companies.
False
Fill in the blank: Earnings before interest and taxes is abbreviated as __________.
EBIT
What does EBITDA stand for?
Earnings Before Interest, Taxes, Depreciation, and Amortization.
Multiple Choice: Which of the following is a key financial metric derived from the income statement? A) Return on Assets B) Current Ratio C) Quick Ratio D) Debt to Equity Ratio
A) Return on Assets
What is the importance of analyzing income statements?
To assess a company’s profitability, operational efficiency, and overall financial health.
True or False: The income statement can be used to project future earnings.
True
