session 1

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Questions and Answers

What is the primary purpose of financial accounting?

To represent the economic and financial position of the company (correct)

To calculate product costs

To analyze internal performance

To support managerial decisions

Who is the primary recipient of financial accounting information?

Internal auditors

Shareholders and creditors (correct)

Employees of the organization

Managers within the company

What does managerial accounting primarily focus on?

Determining tax obligations

Providing insight for management evaluations and choices (correct)

Compiling historical financial data

Creating general financial statements

Which document provides a detailed view of a company's property and rights?

Balance Sheet Signup and view all the answers

What role do financial statements play in management?

They serve as a starting point for assessing performance. Signup and view all the answers

What is the main focus of the IAS 1 standard?

Structure of income and balance sheets Signup and view all the answers

What is the significance of the notes to financial statements?

They provide supplementary information and context. Signup and view all the answers

In terms of accounting systems, which statement is true?

Financial accounting provides information for external parties. Signup and view all the answers

What distinguishes current assets from non-current assets?

Current assets are expected to turn into cash within twelve months. Signup and view all the answers

Which of the following statements accurately describes liabilities?

Liabilities can be classified as current and non-current based on the timing of payment. Signup and view all the answers

Which of the following best represents the company’s wealth?

The difference between total assets and total liabilities. Signup and view all the answers

What does EBIT measure in a company?

Income generated from typical business activity, excluding financing costs. Signup and view all the answers

Which option correctly explains equity in a company?

It is the capital contributed by shareholders. Signup and view all the answers

In the accounting equation, what does the letter 'E' represent?

Total equity. Signup and view all the answers

What is gross margin in the context of an income statement?

The difference between revenues and manufacturing costs, excluding general overhead costs. Signup and view all the answers

Which liabilities arise as a result of business operations?

Accounts payable. Signup and view all the answers

What do operating costs refer to in the context of revenue?

Costs directly tied to the production of goods sold Signup and view all the answers

What does CFO stand for in the context of cash flow?

Cash Flow from Operating Activities Signup and view all the answers

Which of the following statements is true about CFI?

CFI can be negative if there are significant investments in projects Signup and view all the answers

How is net profit derived in financial statements?

By subtracting taxes from profit before taxes Signup and view all the answers

What role do financial costs play in determining profit before taxes?

They are deducted from operating profit Signup and view all the answers

Study Notes

Financial and Management Accounting

Two accounting systems exists within companies
Financial accounting represents the financial and economic company position
Management accounting processes information needed for managerial decisions and evaluations
Financial Statements are the starting point for management performance assessments

Financial Statements Structure

Income Statement represents the difference between revenues and costs
Balance Sheet represents the set of conditions (assets and liabilities) that the company owns and uses
Cash Flow Statement shows the cash flow generated by operational, investment and finance activities

Balance Sheet

Represents the company's assets, liabilities and equity
Assets are classified into current and non-current
Liabilities are classified into current and non-current, and operating and financial
Equity represents capital contribution by shareholders

Income Statement

Reflects revenues, operating costs, and net profit
Operating Profit (EBIT) is the income from typical business activity before interest and taxes
Gross Margin is the difference between revenue and manufacturing costs excluding general overhead costs

Cash Flow Statement

Represents the cash generated from operational, investing and financing activities
CFO represents the cash flow from regular business operations
CFI represents the cash flow from investment and divestment activities
CFF represents the cash flow from financing activities such as new issues and dividend distribution

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Description

This quiz explores the foundational concepts of financial and management accounting. It covers the structure of financial statements, including income statements, balance sheets, and cash flow statements, as well as the classification of assets and liabilities. Perfect for those looking to understand how these aspects contribute to company performance evaluations.