"Breaking Into Wall Street" Accounting
Exam Questions And Answers (Guaranteed
A+)
What does the Income Statement list? - answer✔1. Revenue
2. Expenses
3. Taxes
What criteria must each item meet in order to be listed on the Income Statement? - answer✔1.
It must correspond to the period only shown on the income statement. A 20 year asset would
NOT appear on the 1 year income statement
2. It must affect the company's taxes
ex: interest paid on debt is tax deductible, so it would appear on the income statement
What are the 4 main sections on the income statement? - answer✔1. Revenue and Cost of
Goods Sold
2. Operating Expenses (not directly linked to product sales)
3. Other Income and Expenses
4. Taxes and Net Income
Revenue and Cost of Good Sold means..? - answer✔Rev is the value of the products/services
sold in a period. COGS represents the expenses directly linked to the sale of the
products/services
Operating Expenses - answer✔Items that are not directly linked to the product sales
Ex: Employee salary, rent, marketing, research, etc
Other Income and Expense - answer✔This goes between Operating Income and
Pre-Tax Income. Interest shows up here, as well as items such as Gains
ALL RIGHTS RESERVED.
and Losses when Assets are sold, Impairment Charges, Write-Downs, and
Taxes and Net Income - answer✔Net Income represents the company's "bottom
line" - how much in after-tax profits it has earned. Net Income = Revenue
- Expenses - Taxes.
What ALWAYS appears on the income statement? - answer✔1. Revenue
2. COGS
3.Operating Expenses
4. Depreciation
5. Amoritization
6. Stock Based Compensation
7. Gains
8. Interest
9.Write Downs
What does the balance sheet show? - answer✔The company's resources -
1.its Assets - and how it acquired those resources - 2.Liabilities & Equity - at a specific point in
time.
The sheet must always remain in balance, both sides equaling each other
What does asset ALWAYS equal? - answer✔Assets=liabilities+equity
What is an asset? - answer✔An item that will
result in, directly or indirectly,
additional cash in the future.
What is a liability - answer✔An item that will
result in, directly or indirectly,
less cash in the future. Most
Liabilities are related to external
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