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D196-Module 3 Questions with Explanations of Answers
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D196-Module 3 Questions with Explanations of Answers
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D196-Module 3Why does the balance sheet not reflect the current value or worth of a company? -
ANS-Many assets are recorded at cost and same economic assets are not recorded at
all.
Which statement best characterizes the elements and purpose of a balance sheet? -
ANS-A balance sheet portrays the financial condition of a company at a point in time.
What is owners equity? - ANS-Residual amount representing the net assets available to
another party after all obligations have been satisfied.
What information should be included on the balance sheet? - ANS-Assets and liabilities
Why do the notes to the financial statements contain additional information summary
totals? - ANS-Because one summary in the financial statements represents literally
thousands of individual items
Why do the notes to the financial statements contain a summary of significant
accounting policies? - ANS-Because accounting involves making assumptions,
estimates and judgements.
Information about accounting policies and practices, including assumptions estimates
and judgments are included in which statements at the financial statements. - ANS-The
Notes to the Financial statements
What is the purpose of a classified balance sheet? - ANS-A classified balance sheet
represents a period of time instead of a point in time.
Which item would be classified in the owners equity section of the balance sheet? -
ANS-Retained earnings
What is Sales- Cost of Goods sold? - ANS-Gross profit
What is the calculation for operating income ? - ANS-Sales-Cost of good sold- operating
expenses.
What is the purpose of the notes to the financial statements? - ANS-The notes present
the assumptions needed to help explain financial statements.
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