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Financial Accounting Essentials
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Financial Accounting Essentials
Financial Accounting Essentials
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1
Question
What is a balance sheet?
Page 1
Answer
Report of the assets, liabilities, and equity of a company as of a point in time
2
Question
Which item is classified as a liability on the balance sheet?
Page 1
Answer
Accounts payable
3
Question
Which item is classified as an owners’ equity item on the balance sheet?
Page 1
Answer
Retained earnings
4
Question
Strime Company's assets equal $104,000 and stockholders' equity totals $68,500. What is the amount of its liabilities?
Page 1
Answer
$35,500
5
Question
The Whole Pine Company's liabilities equal $124,000 and stockholders' equity totals $68,500. What is the amount of its assets?
Page 1
Answer
$192,500
6
Question
What is the proper description of the accounting equation?
Page 1
Answer
Assets = Liabilities + Owners’ Equity
7
Question
After recording every transaction, what must the accounting equation always do?
Page 1
Answer
Equal itself, or balance
8
Question
What is a classified balance sheet?
Page 1
Answer
A balance sheet that distinguishes between current and long-term assets
9
Question
What does owners’ equity represent on the balance sheet?
Page 1
Answer
The difference between total assets and total liabilities
10
Question
For most companies, 'current' assets or liabilities on the balance sheet mean they will be converted to cash or paid within what time frame?
Page 1
Answer
The next year
11
Question
Which item is classified as an asset on the balance sheet?
Page 1
Answer
Accounts receivable
12
Question
According to the accounting equation, what is the correct computation of owners’ equity?
Page 1
Answer
Total Assets – Liabilities
13
Question
What is an accurate description of accounts payable?
Page 1
Answer
Obligation arising from the purchase of inventory on account
14
Question
For Bullzai Company, which set of items composes a complete listing of current assets?
Page 1
Answer
Cash, accounts receivable, and inventory
15
Question
What is an income statement?
Page 1
Answer
Report of the revenues and expenses of a company during a period
16
Question
What is an example of a selling, general, and administrative expense?
Page 2
Answer
Wages of company headquarters accounting staff
17
Question
What is depreciation expense?
Page 2
Answer
The amount of wear and tear on long-lived assets during the year
18
Question
Which item is classified as revenue on the income statement?
Page 2
Answer
Sales
19
Question
What are the main components of an income statement?
Page 2
Answer
Revenue and expenses
20
Question
What is net income?
Page 2
Answer
The amount by which revenues exceed expenses
21
Question
How is earnings per share (EPS) computed?
Page 2
Answer
Net income divided by the number of shares
22
Question
What is bad debt expense?
Page 2
Answer
Amount of uncollectible accounts created by credit sales during the year
23
Question
Which item is classified as an expense on the income statement?
Page 2
Answer
Cost of Goods Sold
24
Question
What is a single-step income statement?
Page 2
Answer
Groups and totals revenues; groups and totals expenses
25
Question
What is gross profit?
Page 2
Answer
Sales − Cost of Goods Sold
26
Question
What is a company’s gross profit percentage?
Page 2
Answer
Gross Profit ÷ Sales
27
Question
What is a statement of cash flows?
Page 2
Answer
Report of the operating, investing, and financing cash flows of a company during a period
28
Question
What are financing activities on the statement of cash flows?
Page 2
Answer
Activities whereby cash is obtained from or repaid to owners and creditors
29
Question
What are the major activities reported in the statement of cash flows?
Page 2
Answer
Financing, operating, and investing
30
Question
Which item is a use of cash in a financing activity?
Page 2
Answer
Repaying loans