Unit 3 module 4- financial statements

Question 1

financial statements

Answer 1

• balance sheet
• income statement
• cash flow statement
• statement of owners equity

Question 2

balance sheet

Answer 2

The balance sheet lists all of the company’s assets and all of the ways it uses to pay for those assets (liabilities, debts) and owners equity.

Question 3

balance sheet equation

Answer 3

Total Assets = total liabilities + owners equity.

Question 4

statement of cash flows

Answer 4

explains the change in cash of revenue and expenses from one period to the next

• cash flow operation
• cash flow from investing
• cash flow from financing

Question 5

statement of owners equity

Answer 5

explain the change from one period to another of owners equity section of the balance sheet.

Question 6

income statements

Answer 6

contains all of the revenue, expenses, interest, and taxes that the company pays and reflects the result of that as the NET income

Question 7

equity

Answer 7

residual claim or interest to investors in assets after all liabilities are paid. If liabilities exceed assets, negative equity exists and can be purchased through stock.

Question 8

net income

Answer 8

the difference between net sales and the cost of goods sold.

Question 9

amortization

Answer 9

records the accounting use of any intangible asset (patent, good will) that we have on the balance sheet

Question 10

4 principals of GAAP

Answer 10

1. historical cost
2. revenue recognition
3. matching principle
4. full disclosure

Question 11

matching principle

Answer 11

revenue recorder when cash is given, recorder with expenses (ex.company paid for shipping)

Question 12

revenue recognition principle

Answer 12

recognizes revenue when product is delivered/ received.

Question 13

working capital management

Answer 13

is to ensure that the firm is able to continue its operations and that it has sufficient cash flow.

Question 14

working capital

Answer 14

a measure of how liquid are a business current assets and current liabl

Question 15

historical record

Answer 15

records assets at the lower/original cost of the market

Question 16

GPM (gross profit margin)

Answer 16

revenue- cost of good sold

Question 17

earnings before interest and taxes

Answer 17

Gross profit- Operating expense - depreciation/ amortization expense

Question 18

NET income

Answer 18

revenue- expenses
or
EBT - taxes

Question 19

multi step income statemet

Answer 19

1. subtract non operating expenses from income
2. subtract income tax from income before taxes
3. subtract operating expenses form GP to determine income from operations

Question 20

single step income statement

Answer 20

add all revenues then subtract all expenses

Question 21

depreciation

Answer 21

records the accounting use of any of the fixed assets

Question 22

obselence

Answer 22

when an asset is not productive due to spoilage, breakage etc.

Question 23

3 sections of Cash flow

Answer 23

1. operations
2. investing
3. financing

Question 24

operations

Answer 24

your income statement –> what you use from an operations standpoint

Question 25

investing

Answer 25

looks at how the company invested in fixed assets.

or any investments that the company has made like bonds, stocks, etc.

Question 26

financing

Answer 26

represents the amount of additional net, short term debt, long term debt preferred stock and common stock a company has either sold, borrowed or repaid.