Podcast
Questions and Answers
___ is used to measure the variation in cash between the beginning and the end of a period
___ is used to measure the variation in cash between the beginning and the end of a period
Cash Flow Statement
Assets = Equity + ___
Assets = Equity + ___
Liabilities
A journal entry must affect at least 2 accounts: one must be debited and the other one must be ___
A journal entry must affect at least 2 accounts: one must be debited and the other one must be ___
credited
___ activities include sources and uses of cash from financing and investing
___ activities include sources and uses of cash from financing and investing
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Classification of assets into current and non-current is important in understanding a company's ___ position
Classification of assets into current and non-current is important in understanding a company's ___ position
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The relationship between the P&L (Profit & Loss) statement and the Balance Sheet is an important ___ concept
The relationship between the P&L (Profit & Loss) statement and the Balance Sheet is an important ___ concept
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___ is the cash generation available for distribution among all financing parties of a company
___ is the cash generation available for distribution among all financing parties of a company
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In bookkeeping, a journal entry must have equal debit and ___ amounts
In bookkeeping, a journal entry must have equal debit and ___ amounts
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___ accounting methods consider the lifetime of an investment for depreciation
___ accounting methods consider the lifetime of an investment for depreciation
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P&L statement records all ___ and losses as debits, and all incomes and gains as credits
P&L statement records all ___ and losses as debits, and all incomes and gains as credits
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Study Notes
Accounting Entries
- Recording debits and credits is essential for maintaining accurate financial statements.
- Debiting an account reflects an increase in assets or expenses, while crediting denotes an increase in liabilities or equity.
- Investments are recorded as debits, with the corresponding asset increasing on the balance sheet (BS).
- Sales from inventory generate credits, affecting both the BS and the profit and loss statement (P&L).
Cash Flow Statement
- The cash flow statement outlines sources and uses of cash within corporate activities: financing, investing, and operating.
- It measures cash variation between the beginning and end of a fiscal period, facilitating liquidity analysis.
- Investing and financing activities result in changes to balance sheet accounts, impacting the financial position of a company.
Profitability
- Profit indicates monetary gain after expenses, while profitability assesses the sustainability of generating profits over time.
- Return on investment (ROI) measures efficiency, contrasting returns with invested capital.
Assets Classification
- Assets are divided into current (circulating) and non-current (fixed) categories.
- Current assets include cash, receivables, and inventories, while non-current assets consist of fixed assets such as equipment and real estate.
- Effective classification supports financial management and planning.
Liabilities and Equity
- Liabilities are classified as current (short-term) versus non-current (long-term), impacting cash flow management.
- The balance sheet (BS) reflects financial position: assets equal liabilities plus equity.
- Equity includes shareholder investments, retained earnings, and is vital for funding operations and expansions.
Financing and Debt Management
- Debt involves interest and principal repayment responsibilities, which inform overall financial strategy.
- Free Cash Flow (FCF) represents cash available for distribution among stakeholders after necessary investments.
- Understanding cash flows from operating, investing, and financing activities is crucial for evaluating business sustainability.
Depreciation Accounting
- Depreciation recognizes the value diminish of assets over time, affecting net income and asset valuation.
- Common methods include straight-line and declining balance depreciation, tailored to reflect asset use and economic realities.
Double Entry Accounting
- Double entry bookkeeping mandates every transaction affect at least two accounts—one debit and one credit.
- This system ensures that the accounting equation (Assets = Liabilities + Equity) remains in balance.
- Correctly identifying and recording transactions allows for accurate representation of financial health in primary statements.
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Description
Test your knowledge on accounting entries by identifying the debited and credited accounts for various transactions. Questions include recording investments, sales, and inventory transactions.
