Master Financial Accounting
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Questions and Answers

Which financial statement reports on a company's cash inflow and outflows over a period of time?

  • Statement of Retained Earnings
  • Income Statement
  • Balance Sheet
  • Statement of Cash Flows (correct)

    • How many basic financial statements are there?

  • Four (correct)
  • Five
  • Three
  • Two

    • Which key actor in the financial accounting and reporting process is responsible for setting accounting standards?

  • Accountants
  • SEC
  • FASB (correct)
  • Auditors

    • Which of the following is a key actor in the financial accounting and reporting process?

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

    What is the main difference between a single-step and a multi-step income statement?

    <p>Single-step income statement lists all revenues together and all expenses together, while multi-step income statement includes multiple subtotals before calculating net income.</p> Signup and view all the answers

    What information can be found in financial statement footnotes?

    <p>Accounting methods, assumptions, contingencies</p> Signup and view all the answers

    Which of the following is a key assumption of the accounting conceptual framework?

    <p>All of the above</p> Signup and view all the answers

    What is the effect of a credit in the accounting equation?

    <p>Increase liabilities and equity, decrease assets and expenses</p> Signup and view all the answers

    How is the current ratio calculated?

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

    What does the net profit margin ratio measure?

    <p>How much profit a company makes for each dollar of sales</p> Signup and view all the answers

    Which of the following statements best describes the single-step income statement?

    <p>It lists all revenues and expenses together, with one step to calculate net income.</p> Signup and view all the answers

    What is the purpose of the disclosure process in financial reporting?

    <p>To provide additional notes and supplementary information to financial statements.</p> Signup and view all the answers

    Which ratio is calculated as Gross Profit divided by Sales?

    <p>Gross profit percentage</p> Signup and view all the answers

    How is Return on Total Assets (ROA) calculated?

    <p>Net Income / Average Total Assets</p> Signup and view all the answers

    What information can be found in financial statement footnotes?

    <p>Accounting methods, assumptions, contingencies, etc.</p> Signup and view all the answers

    What does the auditor's report provide?

    <p>An opinion on whether the financial statements are presented fairly.</p> Signup and view all the answers

    Which report provides management's perspective on the company's performance?

    <p>MD&amp;A (Management Discussion &amp; Analysis)</p> Signup and view all the answers

    What are the key actors in financial accounting and reporting?

    <p>Internal parties, external parties, and intermediaries</p> Signup and view all the answers

    What is the main difference between a single-step and a multi-step income statement?

    <p>The single-step income statement lists all revenues together and all expenses together, while the multi-step income statement includes multiple subtotals before calculating net income.</p> Signup and view all the answers

    How is the gross profit percentage calculated?

    <p>Gross Profit / Sales</p> Signup and view all the answers

    Which of the following is a key assumption of the accounting conceptual framework?

    <p>The business will continue in operation for the foreseeable future.</p> Signup and view all the answers

    How is the current ratio calculated?

    <p>Current Assets divided by Current Liabilities</p> Signup and view all the answers

    What is the effect of a credit in the accounting equation?

    <p>Increases liabilities and decreases assets</p> Signup and view all the answers

    Which financial statement reports on a company's cash inflow and outflows over a period of time?

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

    What are the five major types of adjusting entries?

    <p>Prepayments, accruals, and estimates</p> Signup and view all the answers

    What is the main difference between a single-step and a multi-step income statement?

    <p>The inclusion of non-operating revenues and expenses</p> Signup and view all the answers

    Which key actor in the financial accounting and reporting process is responsible for setting accounting standards?

    <p>Financial Accounting Standards Board (FASB)</p> Signup and view all the answers

    What does the net profit margin ratio measure?

    <p>How much profit a company makes for each dollar of sales</p> Signup and view all the answers

    Which of the following is a key actor in the financial accounting and reporting process?

    <p>Financial Accounting Standards Board (FASB)</p> Signup and view all the answers

    What information can be found in financial statement footnotes?

    <p>Details about the company's accounting policies</p> Signup and view all the answers

    Which financial statement shows the company's assets, liabilities, and equity at a specific point in time?

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

    Which financial statement reports on a company's revenues, expenses, and profits or losses over a period of time?

    <p>The Income Statement</p> Signup and view all the answers

    Which financial statement shows changes in retained earnings over a period of time?

    <p>The Statement of Retained Earnings</p> Signup and view all the answers

    Which financial statement reports on a company's cash inflow and outflows over a period of time?

    <p>The Statement of Cash Flows</p> Signup and view all the answers

    How are the four basic financial statements related to one another?

    <p>Net income from the income statement affects the retained earnings on the statement of retained earnings, which then affects equity on the balance sheet.</p> Signup and view all the answers

    Who are the key actors in the financial accounting and reporting process?

    <p>Accountants, auditors, regulatory bodies, and standard-setting bodies</p> Signup and view all the answers

    What is the primary purpose of financial accounting?

    <p>To provide information about a firm's performance to external parties</p> Signup and view all the answers

    What is financial accounting?

    <p>A branch of accounting that keeps track of a company's financial transactions</p> Signup and view all the answers

    Which regulatory body is responsible for setting accounting standards?

    <p>The FASB</p> Signup and view all the answers

    What is the role of the CPA profession in business today?

    <p>To audit financial statements and provide assurance on their accuracy</p> Signup and view all the answers

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