ACCT-212-8
Week 4-MidTerm
Week 4: MidTerm
(TCO 1) The Accounting Equation is used to develop the organization's financial reports.
(1) Describe what liabilities value would be if Assets are $50,000 and Owners' Equity is
$25,000 by showing the Accounting Equation (10 points) and (2) provide an example of two
liability accounts. (10 points)
Answer Midterm #1
Assets = Liabilities + Stockholders’ Equity
$50,000 $25,000 $25,000
Total $50,000 $25,000 $25,000
2 examples of liability accounts:
1) Accounts Payable
2) Unearned Service Revenue
(TCO 1) The financial statements present a company to the public in financial
terms. (1) Which financial statement should be prepared first and why (10 points),
and (2) explain what information this financial statement provides. (10 points)
Answer: ”Once the adjusting entries have been made or entered into a worksheet, the
financial statements can be prepared using information from the ledger accounts.
Because some of the financial statements use data from other statements” as retrieved
from: http://www.netmba.com/accounting/fin/process/statements/ .
I also have retrieved information from the text in Chapter 1:
1st Prepare: Income statement (sometimes known as the statement of operations)
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, 2nd Prepare: Statement of retained earnings (usually included in statement of stockholders’
equity)
3rd Prepare: Balance sheet (sometimes known as the statement of financial position)
4th Prepare: Statement of cash flows
The reason for this order is that per the text “Financial statements are the business documents
that companies use to report the results of their activities to various user groups, which can
include managers, investors, creditors, and regulatory agencies.” Reference: Harrison, W.T. Jr.,
Horngren, C.T. & Thomas, C.W. (2013). Financial Accounting. (9th ed.). Upper Saddle River,
NJ: Pearson (Pg 2). The regulatory agency that governs how accounting is accepted in the U.S. is
G.A.A.P. (generally accepted accounting principles). The financial statements also have balances
that flow into the next statement as a continuation.
The information that financial statements provide is a health check on a company for internal and
external reasons. It lays out how the company is doing in regards to income, sales, profits, losses,
their cash flow and is a method of communicating the financial well-being of a company. This is
essential for drawing a line in the sand so to speak and each month have documentation of the
finances. As the article in www.inc.com states “They include standard reports like the balance
sheet, income or profit and loss statements, and cash flow statement. They stand as one of the
more essential components of business information, and as the principal method of
communicating financial information about an entity to outside parties. In a technical sense,
financial statements are a summation of the financial position of an entity at a given point in
time. Generally, financial statements are designed to meet the needs of many diverse users,
particularly present and potential owners and creditors. Financial statements result from
simplifying, condensing, and aggregating masses of data obtained primarily from a company's
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Week 4-MidTerm
Week 4: MidTerm
(TCO 1) The Accounting Equation is used to develop the organization's financial reports.
(1) Describe what liabilities value would be if Assets are $50,000 and Owners' Equity is
$25,000 by showing the Accounting Equation (10 points) and (2) provide an example of two
liability accounts. (10 points)
Answer Midterm #1
Assets = Liabilities + Stockholders’ Equity
$50,000 $25,000 $25,000
Total $50,000 $25,000 $25,000
2 examples of liability accounts:
1) Accounts Payable
2) Unearned Service Revenue
(TCO 1) The financial statements present a company to the public in financial
terms. (1) Which financial statement should be prepared first and why (10 points),
and (2) explain what information this financial statement provides. (10 points)
Answer: ”Once the adjusting entries have been made or entered into a worksheet, the
financial statements can be prepared using information from the ledger accounts.
Because some of the financial statements use data from other statements” as retrieved
from: http://www.netmba.com/accounting/fin/process/statements/ .
I also have retrieved information from the text in Chapter 1:
1st Prepare: Income statement (sometimes known as the statement of operations)
Page | 1
, 2nd Prepare: Statement of retained earnings (usually included in statement of stockholders’
equity)
3rd Prepare: Balance sheet (sometimes known as the statement of financial position)
4th Prepare: Statement of cash flows
The reason for this order is that per the text “Financial statements are the business documents
that companies use to report the results of their activities to various user groups, which can
include managers, investors, creditors, and regulatory agencies.” Reference: Harrison, W.T. Jr.,
Horngren, C.T. & Thomas, C.W. (2013). Financial Accounting. (9th ed.). Upper Saddle River,
NJ: Pearson (Pg 2). The regulatory agency that governs how accounting is accepted in the U.S. is
G.A.A.P. (generally accepted accounting principles). The financial statements also have balances
that flow into the next statement as a continuation.
The information that financial statements provide is a health check on a company for internal and
external reasons. It lays out how the company is doing in regards to income, sales, profits, losses,
their cash flow and is a method of communicating the financial well-being of a company. This is
essential for drawing a line in the sand so to speak and each month have documentation of the
finances. As the article in www.inc.com states “They include standard reports like the balance
sheet, income or profit and loss statements, and cash flow statement. They stand as one of the
more essential components of business information, and as the principal method of
communicating financial information about an entity to outside parties. In a technical sense,
financial statements are a summation of the financial position of an entity at a given point in
time. Generally, financial statements are designed to meet the needs of many diverse users,
particularly present and potential owners and creditors. Financial statements result from
simplifying, condensing, and aggregating masses of data obtained primarily from a company's
Page | 2
