Financial Accounting Exam 1 - Chapter 1 &
2 Study Guide.
Two functions of accounting are - answermeasuring and communicating
Relationship between Income Statement and Statement of Stockholder's Equity? - answerNet
Income from the Income Statement in transferred to SE and is used to calculate Re...
Two functions of accounting are - answer✔measuring and communicating
Relationship between Income Statement and Statement of Stockholder's Equity? - answer✔Net
Income from the Income Statement in transferred to SE and is used to calculate Retained
Earnings
- (Beg balance + Net Income - Dividends)
Relationship between SE and Balance Sheet - answer✔Ending Retained Earnings from the
Balance Sheet is transferred from SE to the Balance Sheet and is used under the Stockholder's
Equity
Relationship between Balance Sheet and Statement of Cash Flow - answer✔The statement of
cash flows reconciles changes in the cash account from the beginning to the ending balance sheet
3 aspects of Cash Flow - answer✔Operating
Financing
Investing
Cash Flow- Operating - answer✔Involves transactions that relate to the primary operations of the
company; providing products and services to customers
ex: rent, salaries, utilities, taxes, advertising
Cash Flow- Financing - answer✔Includes transactions the company has with investors and
creditors
ex: issuing stock, borrowing money from bank (notes payable)
Cash Flow- Investing - answer✔Cash transactions for the purchase of long-term assets and
investments; assets that provide benefits for longer than 1 year
ex: equipment, land, plant assets
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