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Financial Statements Overview
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Financial Statements Overview

Created by
@WinningDandelion

Questions and Answers

In which financial statement does a company report its revenues?

Income Statement

Accounts: Utilities Payable is classified as what?

Liabilities

Accounts: Cash is classified as what?

Asset

Accounts: Salaries Expense relates to which transaction?

<p>Cost of Salaries</p> Signup and view all the answers

Accounts: Common Stock are shares of ownership sold to whom?

<p>Investors</p> Signup and view all the answers

Accounts: Service Revenue is classified as what?

<p>A revenue</p> Signup and view all the answers

Sales of products or services are referred to as what?

<p>Revenues</p> Signup and view all the answers

Owners' claim to resources is known as what?

<p>Stockholders' Equity</p> Signup and view all the answers

Distribution to stockholders is called what?

<p>Dividends</p> Signup and view all the answers

Costs of selling products or services are known as what?

<p>Expenses</p> Signup and view all the answers

Resources of a company are referred to as what?

<p>Assets</p> Signup and view all the answers

Amounts owed are classified as what?

<p>Liabilities</p> Signup and view all the answers

The term GAAP stands for what?

<p>Generally Accepted Accounting Principles</p> Signup and view all the answers

The primary function(s) of financial accounting is(are) to:

<p>Measure business activities of a company and communicate information about business activities to outside users</p> Signup and view all the answers

Financial accounting provides information primarily to whom?

<p>Investors and creditors</p> Signup and view all the answers

The financial statement that shows the financial position of a company at a specific point in time is called the:

<p>Balance Sheet</p> Signup and view all the answers

Which of the following represents a resource of the company?

<p>Asset</p> Signup and view all the answers

Statement of stockholders' equity is related to what term?

<p>Dividends</p> Signup and view all the answers

The income statement provides details about what?

<p>Revenues and expenses</p> Signup and view all the answers

The balance sheet represents what?

<p>Assets and liabilities</p> Signup and view all the answers

The balance in retained earnings represents:

<p>The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life</p> Signup and view all the answers

Expenses represent:

<p>Costs of providing products or services to customers</p> Signup and view all the answers

Change in owners' claims to resources is represented by the:

<p>Statement of Stockholders' Equity</p> Signup and view all the answers

Profitability of the company is shown in the:

<p>Income statement</p> Signup and view all the answers

Change in cash as a result of operating, investing, and financing activities is captured in the:

<p>Statement of cash flows</p> Signup and view all the answers

Resources equal creditors' and owners' claims to those resources represented in the:

<p>Balance Sheet</p> Signup and view all the answers

Liabilities are described as what?

<p>Amounts owed to the bank</p> Signup and view all the answers

Revenues can also refer to what?

<p>Cleaning services provided to customers</p> Signup and view all the answers

Dividends are described as what?

<p>Payments made to stockholders</p> Signup and view all the answers

Assets can include what?

<p>Land owned by a company</p> Signup and view all the answers

Stockholders' equity can include what?

<p>Common stock issued to investors</p> Signup and view all the answers

Expenses can include what?

<p>Workers' salaries for the current period</p> Signup and view all the answers

Amounts owed to creditors are reported as:

<p>Liabilities</p> Signup and view all the answers

In which financial statement does a company report its expenses?

<p>Income statement</p> Signup and view all the answers

Which of the following equations correctly represents the fundamental accounting equation?

<p>Assets = Liabilities + Stockholders' Equity</p> Signup and view all the answers

The change in retained earnings due to net income and dividends is detailed in the:

<p>Statement of Stockholders' Equity</p> Signup and view all the answers

Amount of cash received from borrowing money from a local bank is reflected in the:

<p>Statement of cash flows</p> Signup and view all the answers

Revenue from sales to customers during the year is reported in the:

<p>Income statement</p> Signup and view all the answers

Total amounts owed to workers at the end of the year is reflected in the:

<p>Balance sheet</p> Signup and view all the answers

Who ultimately is responsible for properly applying GAAP?

<p>Management</p> Signup and view all the answers

Account: Rent Expense corresponds to what classification?

<p>Expense</p> Signup and view all the answers

Account: Interest Revenue corresponds to what classification?

<p>Revenue</p> Signup and view all the answers

Account: Dividends corresponds to what classification?

<p>Dividend</p> Signup and view all the answers

Account: Land is an example of what classification?

<p>Asset</p> Signup and view all the answers

Account: Accounts Payable corresponds to what classification?

<p>Liability</p> Signup and view all the answers

Study Notes

Financial Statements

  • Income Statement reports revenues and expenses, reflecting a company's profitability over a specific period.
  • Balance Sheet provides a snapshot of a company's financial position at a particular point in time, detailing assets, liabilities, and stockholders' equity.
  • Statement of Stockholders' Equity reflects changes in ownership claims to resources, primarily through retained earnings and dividends.
  • Statement of Cash Flows details changes in cash as a result of operating, investing, and financing activities.

Key Accounting Concepts

  • Assets: Resources owned by a company, such as cash, land, and accounts receivable.
  • Liabilities: Amounts owed by a company, including payables to creditors and banks.
  • Stockholders' Equity: Owners' claim to the company's resources, including common stock and retained earnings.
  • Revenues: Earnings from sales of products or services, including service revenue and interest revenue.
  • Expenses: Costs associated with providing products or services, such as salaries, rent, and utilities.

Important Account Classifications

  • Assets: Cash, Land, Accounts Receivable
  • Liabilities: Accounts Payable, Utilities Payable, Loans
  • Equity: Common Stock, Retained Earnings, Dividends
  • Revenues: Service Revenue, Interest Revenue
  • Expenses: Salaries Expense, Rent Expense, Utilities Expense

Financial Accounting Principles

  • GAAP stands for Generally Accepted Accounting Principles, which guide the preparation of financial statements.
  • Financial accounting aims to measure business activities and provide relevant information to external users like investors and creditors.
  • The fundamental accounting equation is Assets = Liabilities + Stockholders' Equity, demonstrating the relationship between resources and claims.

Transactions Examples

  • Revenues: Cleaning services provided and interest earned contribute to overall revenue.
  • Expenses: Salaries for the current period, rent costs, and utilities accrued represent expenses incurred.
  • Dividends: Cash payments made to stockholders as a return on their investment.

Retained Earnings

  • The balance in retained earnings reflects the cumulative income earned by a company minus dividends paid over its lifetime.

Cash Flow Management

  • Cash inflows from borrowing and revenues must be distinguished from operating and investing expenses to assess cash flow accurately.

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Description

This quiz tests your knowledge of key financial statements including the Income Statement, Balance Sheet, and Statement of Cash Flows. Explore fundamental accounting concepts such as assets, liabilities, and stockholders' equity. Assess your understanding of how these statements reflect a company's performance and financial position.

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