Exam (elaborations)
Financial Accounting Exam 1 - Chapter 1 & 2 Questions and Answers
- Course
- Accounting
- Institution
- Accounting
Financial Accounting Exam 1 - Chapter 1 & 2 Questions and Answers
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Financial Accounting Exam 1 - Chapter 1& 2 Questions and Answers
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
Generally Accepted Accounting Principles (GAAP) - Answer-common set of accounting
principles, standards and procedures that companies must follow when they compile
their financial statements
- Issued by FASB
Financial Accounting Standards Board (FASB) - Answer-private, non-profit organization
market regulator whose primary purpose is to establish and improve generally accepted
accounting principles (GAAP) within the United States
Name the Financial Statement and Normal Balance of the following
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