Deck 9: Understanding financial Statements

Question 1

The collection and use of information for purposes of reporting the financial position and performance of a firm to various outside entities such as lenders, investors and suppliers is referred to as -------------------------------.

Answer 1

financial accounting

Question 2

The ------------------------------- is a summary of what a business owns and owes, and what the owners have invested as of a point in time.

Answer 2

balance sheet

Question 3

The ------------------------------- approach of preparing an income statement reports revenues when earned and expenses when incurred regardless of when the cash is received and paid.

Answer 3

accrual

Question 4

The financial statement that details cash inflows and outflows for a period of time is called a -------------------------------.

Question 5

The amounts that a business owes are called -------------------------------

Question 6

Financial statement(s) include

A) Sales reports
B) Invoices
C) Balance sheet
D) None of the above

Question 7

The components of an income statement are

A) Revenues
B) Expenses
C) Cost of Goods Sold
D) All of the above

Question 8

The balance sheet formula is

A) Assets = liabilities + owner's equity
B) Assets + owner's equity = liabilities
C) Assets + liabilities = owner's equity
D) None of the above

Question 9

The net income formula emphasized in the income statement is

A) Net operating income = gross sales - discounts
B) Net operating income = gross sales - discounts - cost of goods sold
C) Net operating income = net sales - cost of goods sold - operating expenses
D) None of the above

Question 10

If service revenue is included in net sales for a firm, net sales - cost of goods sold would be

A) Gross profit
B) Net operating income
C) Gross margin
D) None of the above

Question 11

When a firm purchases a truck, with depreciation taken on the truck and reported on the income statement for that year and succeeding years, the amount paid for the truck purchase at the time of purchase is known as (an) ____________ .

A) Expense
B) Expenditure
C) Both
D) Neither

Question 12

Depreciation would be an example of a(n) __________ expense.

A) Marketing
B) Administrative
C) General
D) None of the above

Question 13

An example of an administrative expense would be

A) Advertising
B) Rent
C) Auditing fees
D) Property taxes

Question 14

The collection and use of information for the purpose of helping managers guide the operation of the business intelligently and making good management decisions that are consistent with the needs, objectives, and goals of the company are referred to as managerial accounting.

Question 15

A prepaid expense would be classified as a liability on the balance sheet.

Question 16

Interest on debt that is projected for the upcoming year would be recorded as a current liability on the income statement.

Question 17

Net operating income is calculated before other income and interest expense.

Question 18

The statement of owner's equity would include dividends paid to shareholders for a proprietorship.

Question 19

If a mortgage equals $100,000 and the first principal payment of $10,000 is due to be paid 18 months after the loan is made, the amount recorded as a current liability on the balance sheet prepared at the loan origination would be $0.

Question 20

Another name for an income statement is a P and L statement.

Question 21

The accounting period used by some agribusiness firms is a fiscal year that may be different than a calendar year.

Question 22

If total assets equal $600,000 and total liabilities equal $400,000, then owner's equity equals $1,000,000.

Question 23

Accumulated depreciation on equipment is reported as a liability on the balance sheet.