ACC 300 1 TEST EXAM QUESTIONS WITH
VERIFIED SOLUTIONS
What does a financial repot do?
provide info to investors and lenders to help those investors and lenders make decisions
what is FASB?
the set of accounting rules
what are the two different types of companies?
1. private companies: ownership in the company is privately held (there are only a few people
that run it. MAJORITY of companies are private)
2. public companies: the investing public owns the company. the ownership rights of the
company (stock) is freely bought and sold in a public market called a stock exchange. (1% of the
companies in the US are public)
EACH OF THESE PROVIDE DIFFERENT FINANCIAL REPORTS
who do private companies prepare financial reports for?
1. owners/investors: financial reports help the owners to understand how the business is doing.
2. banks: lenders require companies to submit financial reports on a periodic basis.
3. tax preparers/agencies: financial reports help companies to prepare companies to prepare their
tax return each year.
what do companies submit financial reports with?
the SEC under the securities exchange act
what are the general sections that a financial report consists of?
1. general business disclosures (DESCRIPTIONS of the business, RISKS it faces, PROPERTIES
it owns, LEGAL. MATTERS ect)
2. management discussion and analysis (DISCUSSIONS about the business, current financial
position, ect)
3. financial statements (balance sheet, income statement, statement of cash flow)
4. notes to the financial statements (additional disclosures ab the company's financial position)
what are consolidated balance sheets/statements of income/statements of cash
flows/statements of shareholder's equity?
when one company owns another company- exl: Nike owns 100% of converse, so converse's
financial statements are consolidated into Nike's financial statements.
what do quarterly reports and annual reports look like?
, quarterly reports: 10-Q, done the first 3 quarters of the yr
annual report: 10K filing, requires companies to file an annual report that includes the results
from the 4 quarter of the year.
how are the numbers in the financial reports determined?
small private companies: cash basis of accounting (following cash around and accounting for it)
public companies: required to prepare their financial reports in accordance with GAAP (GAAP
is "generally accepted accounting principles)
who determines GAAP?
Financial accounting standards board (FASB), for the rest of the world: International accounting
standards board (IASB)
what is accrual accounting?
attempts to record the financial effects of transactions in the periods which those transactions
occur (financial events are recorded in the financial statement as the events and transactions
happen, not when the money actually arrives)
what is a balance sheet? what are other names for the balance sheet?
shows what a business has, owes, and owns at a MOMENT IN TIME
AKA statement of financial position
assets: what the business has (will result in a cash inflow (will bring money into the business in
the future, like buying an apple tree because it will produce apples you can sell for cash later))
liabilities: what the business owes
equity: what the owner truly owns (assets= liabilities+ equity)
what are other names for equity?
-owner's equity
-shareholder's equity
-stockholder's equity/net assets
what does liabilities + equity show?
the sources of the resources (assets) that the company has. did the capital (money) to fund the
assets come from:
1. banks- borrowing (liabilties)
2. investors- stock contributions (equity)
3. customers- profitable operations (equity)
what is the composition of a balance sheet?
ASSETS: current assets + non-current assets
LIABILITIES+ EQUITY: current liabilities + non-current liabilities, contributed capital, and
earned capital
VERIFIED SOLUTIONS
What does a financial repot do?
provide info to investors and lenders to help those investors and lenders make decisions
what is FASB?
the set of accounting rules
what are the two different types of companies?
1. private companies: ownership in the company is privately held (there are only a few people
that run it. MAJORITY of companies are private)
2. public companies: the investing public owns the company. the ownership rights of the
company (stock) is freely bought and sold in a public market called a stock exchange. (1% of the
companies in the US are public)
EACH OF THESE PROVIDE DIFFERENT FINANCIAL REPORTS
who do private companies prepare financial reports for?
1. owners/investors: financial reports help the owners to understand how the business is doing.
2. banks: lenders require companies to submit financial reports on a periodic basis.
3. tax preparers/agencies: financial reports help companies to prepare companies to prepare their
tax return each year.
what do companies submit financial reports with?
the SEC under the securities exchange act
what are the general sections that a financial report consists of?
1. general business disclosures (DESCRIPTIONS of the business, RISKS it faces, PROPERTIES
it owns, LEGAL. MATTERS ect)
2. management discussion and analysis (DISCUSSIONS about the business, current financial
position, ect)
3. financial statements (balance sheet, income statement, statement of cash flow)
4. notes to the financial statements (additional disclosures ab the company's financial position)
what are consolidated balance sheets/statements of income/statements of cash
flows/statements of shareholder's equity?
when one company owns another company- exl: Nike owns 100% of converse, so converse's
financial statements are consolidated into Nike's financial statements.
what do quarterly reports and annual reports look like?
, quarterly reports: 10-Q, done the first 3 quarters of the yr
annual report: 10K filing, requires companies to file an annual report that includes the results
from the 4 quarter of the year.
how are the numbers in the financial reports determined?
small private companies: cash basis of accounting (following cash around and accounting for it)
public companies: required to prepare their financial reports in accordance with GAAP (GAAP
is "generally accepted accounting principles)
who determines GAAP?
Financial accounting standards board (FASB), for the rest of the world: International accounting
standards board (IASB)
what is accrual accounting?
attempts to record the financial effects of transactions in the periods which those transactions
occur (financial events are recorded in the financial statement as the events and transactions
happen, not when the money actually arrives)
what is a balance sheet? what are other names for the balance sheet?
shows what a business has, owes, and owns at a MOMENT IN TIME
AKA statement of financial position
assets: what the business has (will result in a cash inflow (will bring money into the business in
the future, like buying an apple tree because it will produce apples you can sell for cash later))
liabilities: what the business owes
equity: what the owner truly owns (assets= liabilities+ equity)
what are other names for equity?
-owner's equity
-shareholder's equity
-stockholder's equity/net assets
what does liabilities + equity show?
the sources of the resources (assets) that the company has. did the capital (money) to fund the
assets come from:
1. banks- borrowing (liabilties)
2. investors- stock contributions (equity)
3. customers- profitable operations (equity)
what is the composition of a balance sheet?
ASSETS: current assets + non-current assets
LIABILITIES+ EQUITY: current liabilities + non-current liabilities, contributed capital, and
earned capital
