Principles of Financial Accounting Exam 1 Questions And Answers
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Course
Financial Accounting
Institution
Financial Accounting
Principles of Financial Accounting Exam 1
Questions And Answers
Business Activities 1. Financing Activities
2. Investing Activities
3. Operating Activities
Financing Activities Obtaining funds to start a business (from owners or creditors.
Investing Activities Buying assets which are used t...
Principles of Financial Accounting Exam 1
Questions And Answers
Business Activities 1. Financing Activities
2. Investing Activities
3. Operating Activities
Financing Activities Obtaining funds to start a business (from owners or creditors.
Investing Activities Buying assets which are used to generate revenues.
Operating Activities Operating the business to earn a profit
Companies prepare four basic financial statements: 1. Balance Sheet
2. Income Statement
3. Retained earnings statement
4. Statement of cash flows
, Principles of Financial Accounting Exam 1
Questions And Answers
Balance Sheet reports the resources owned by a company (assets) and the claims against
those resources (liabilities and stockholders' equity) at a specific point in time.
Income statement reports how well a company has performed its operations (revenues,
expenses, and net income/loss) over a period of time.
Retained earnings statement reports how much of the company's income was retained in
the business and how much was distributed to owners over a period of time.
Statement of cash flows reports the sources and uses of a company's cash over a period of
time.
Generally accepted accounting principles (GAAP) were developed by several different
organizations over a number of years.
In the United States, the Securities and Exchange Commission (SEC) has the power to set
accounting rules for publicly traded companies.
, Principles of Financial Accounting Exam 1
Questions And Answers
SEC has delegated this authority to the Financial Accounting Standards Board (FASB).
While the FASB is the primary accounting standard setter in the United States, the FASB has
been working closely with the the International Accounting Standards Board (IASB) in its
development of international financial reporting standards (IFRS).
Assets = Liabilities + Stockholder's Equity
Total assets must always equal total liabilities plus stockholders' equity
What are Assets: Current assets: (e.g. , cash, accounts receivable, inventories)
Long term investment
Property, Plant, and Equipment: (e.g. , land, equipment)
Intangible assets: (e.g. , patents, copyrights)
What are Liabilities Current liabilities: (e.g., accounts payable, salaries payable)
Long term liabilities (e.g., notes payable, bonds payable)
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