COM 315 - Financial Accounting(All answered)
Proprietorship correct answers -Single Owner
-Not a separate legal entity
-Taxed in hands of owner
-Low cost = easy to start
-High Risk
Corporations correct answers -Single or multiple owners
-Separate legal entity, legally distinct from owners
-Taxed separately
-Most expensive to create (must also register)
-Shareholders = easier to raise money
Partnership correct answers -Multiple owners
-Not a separate legal entity
-Taxed in hands of owners
-Moderately expensive to establish
3 Categories of Business correct answers 1. Financing Activities
2. Investing Activities
3. Operating Activities
Financing Activities correct answers -Creation of money for the purchasing of goods & services
2 Main ways:
-Investors
-Creditors
Investing Activities correct answers -Investing funds to achieve long or short term goals
-Buying/Selling shares of other companies
-Buying/Selling property, plant or equipment
Operating Activities correct answers -Day-to-day ongoing activities of a company
-Companies Revenues/Expenses:
-Sales to customers
-Expenses of business
Statement of Income correct answers -Measurement of company performance over time
-Revenues - Expenses = Profits includes:
-Sales Revenues
-Other Income
-COGs
-Selling, Gen., Admin. Expenses
-Amorization, interest, Income Tax Expense
-Earnings/ Share Disclosure
-Net Income
-Gross Profit
, Statement of Changes in Equity correct answers -Measures the changes in the equity of the
company over a period of time, differentiating between changes that result from transactions
with shareholders and those resulting from the company's operations.
Retained Earnings correct answers Opening Retained Earnings
+Net Income
-Dividends Declared
=Ended Retained Earnings
Statement of Cash Flows correct answers Measures the change in cash flow through operating,
financing, and investing activities over a period of time.
Statement of Financial Position correct answers -Measures resources controlled by a company
(assets) and claims on those resources (by creditors and Investors) at any given point of time
-Lists:
-Assets
-Liabilities
-Shareholders Equity
Also known as Balance Sheet
-Listed into order of liquidity
Classified statement of financial position correct answers A statement of financial position in
which the assets and liabilities are listed in liquidity order and are categorized into current (or
short-term) and non-current (or long-term) sections.
Working Capital correct answers WC = Current Assets - Current Liabilities
Liquidity
(CAIP) or Current Assets in Place correct answers How quickly a company can turn assets into
cash
Cash
Accounts Receivable
Inventory
Prepaids
Accounting Equation correct answers Assets (Expenses) = Liabilities + Shareholders Equity
(Revenues)
MUST BALANCE
Characteristics of an Asset correct answers 1. It is a resource controlled by an entity.
2. The company expects future economic benefits from the use or sale of the resource.
3. The event that gave the company control of the resource has already happened.
Proprietorship correct answers -Single Owner
-Not a separate legal entity
-Taxed in hands of owner
-Low cost = easy to start
-High Risk
Corporations correct answers -Single or multiple owners
-Separate legal entity, legally distinct from owners
-Taxed separately
-Most expensive to create (must also register)
-Shareholders = easier to raise money
Partnership correct answers -Multiple owners
-Not a separate legal entity
-Taxed in hands of owners
-Moderately expensive to establish
3 Categories of Business correct answers 1. Financing Activities
2. Investing Activities
3. Operating Activities
Financing Activities correct answers -Creation of money for the purchasing of goods & services
2 Main ways:
-Investors
-Creditors
Investing Activities correct answers -Investing funds to achieve long or short term goals
-Buying/Selling shares of other companies
-Buying/Selling property, plant or equipment
Operating Activities correct answers -Day-to-day ongoing activities of a company
-Companies Revenues/Expenses:
-Sales to customers
-Expenses of business
Statement of Income correct answers -Measurement of company performance over time
-Revenues - Expenses = Profits includes:
-Sales Revenues
-Other Income
-COGs
-Selling, Gen., Admin. Expenses
-Amorization, interest, Income Tax Expense
-Earnings/ Share Disclosure
-Net Income
-Gross Profit
, Statement of Changes in Equity correct answers -Measures the changes in the equity of the
company over a period of time, differentiating between changes that result from transactions
with shareholders and those resulting from the company's operations.
Retained Earnings correct answers Opening Retained Earnings
+Net Income
-Dividends Declared
=Ended Retained Earnings
Statement of Cash Flows correct answers Measures the change in cash flow through operating,
financing, and investing activities over a period of time.
Statement of Financial Position correct answers -Measures resources controlled by a company
(assets) and claims on those resources (by creditors and Investors) at any given point of time
-Lists:
-Assets
-Liabilities
-Shareholders Equity
Also known as Balance Sheet
-Listed into order of liquidity
Classified statement of financial position correct answers A statement of financial position in
which the assets and liabilities are listed in liquidity order and are categorized into current (or
short-term) and non-current (or long-term) sections.
Working Capital correct answers WC = Current Assets - Current Liabilities
Liquidity
(CAIP) or Current Assets in Place correct answers How quickly a company can turn assets into
cash
Cash
Accounts Receivable
Inventory
Prepaids
Accounting Equation correct answers Assets (Expenses) = Liabilities + Shareholders Equity
(Revenues)
MUST BALANCE
Characteristics of an Asset correct answers 1. It is a resource controlled by an entity.
2. The company expects future economic benefits from the use or sale of the resource.
3. The event that gave the company control of the resource has already happened.
