Lesson One: Equations

Question 1

Statement of Retained Earnings:

Answer 1

Beginning Retained Earnings + Net Income - Dividends = End Retained Earnings

Explains changes in retained earnings from net income (or loss) and any dividends over a period of time.

Question 1

Income Statement:

Answer 1

Revenues - Expenses = Net Income

Describes a company’s revenues and expenses and computes net income or loss over a period of time.

Question 2

Balance Sheet:

Answer 2

Assets = Liabilities + Equity

Describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.

Question 3

Statement of Cash Flows

Answer 3

+/- Operating Cash Flow +/- Investing Cash Flow +/- Financing Cash Flow = Change in Cash

Identifies cash inflows (receipts) and cash outflows (payments) over a period of time.

Question 4

Order of Prepared Financial Statements:

Answer 4

Income statement, statement of retained earnings, balance sheet, and statement of cash flows.