Major Field Test Business Study Set with Verified Solutions

Major Field Test Business Study Set with Verified Solutions Balance Sheet Attempts to describe the financial condition of the firm at a point in time. Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting liabilities from assets.. Income Statement Presents the results of the operations of an entity over a peroid of time. Includes: Revenues, Expenses, Income, Gains & Losses Statement of Equity or Statement of Retained Earnings (Capital) Bridges the gap between the income statement and the balance sheet. Arrangement depends on type of organization: Proprietorship: Statement of Owners Equity Partnership: Statement of Partners Equity Corporation: Statement of Stockholders Equity In addition, it contains: Investments by Owners and Distribution to owners Statement of Cash Flows Provides information about a company's cash receipts and cash payments during a specific period of time. Includes all 10 elements of financial statements: assets, liabilities, equity, net income, income, gains, losses, Statement of 'X' Equity, Investments by Owners, Distributions to Owners. Cash Basis Accounting Revenue is recognized in the accounting period in which the associated cash is received and Expenses are recognized in the accounting period that the cash is paid. Accrual Basis Accounting Revenue is recognized in the accounting period in which the revenue is earned, regardless of when the associated revenue is received. (Recorded when the sale is made, not when it is paid for.) Depreciation A method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes. Straight-Line Deprecation Straight Line Depreciation - (estimated value/useful life) Equal amounts of depreciation expense are recorded in each period of the useful life of the asset, if not disposed of prior to the end of estimated useful life. The value is divided among estimated life of item. Double Declining Balance Depreciation Double Declining Balance An "accelerated" depreciation method (more expense is recorded in the early periods of useful life and less in the later periods.) Basic Inventory Equation for Goods Beginning Inventory + Purchases = Goods Basic Inventory Equation for Cost of Goods Sold (COGS) Goods Available for Sale - Ending Inventory = Cost of Goods Sold (COGS) Basic Inventory Equation for Ending Inventory Beginning Inventory + Purchases = Goods Available for Sale - Cost of Goods Sold (COGS) = ending inventory Periodic Inventory Accounting No transactions are recorded in the inventory account until the end of the accounting period. Merchandise purchases are recorded in a purchases account. Inventory is counted and costed at the end of each accounting period. The inventory account beginning balance is adjusted to physical inventory amount and the difference is added to or subtracted from periodic Cost of Goods Sold.