BUS-A304 EXAM 1QUESTIONS & ANSWERS
4 Basic Financial Statements - Answers :Balance Sheet, Income Statement, Statement
of Stockholders Equity, Statement of Cash Flows
Balance Sheet - Answers :Reports the financial position (amount of assets, liabilities,
and stockholders equity) of an accounting entity at a particular point in time.
(Snapshot of financial position)
Format: Company name, title, specific date, unit of measure
Balance Sheet Equation - Answers :Assets = Liabilities + Stockholders' Equity
Assets - Answers :Economic resources owned by the business as a result of past
transactions.
Cash
Short term investments
Accounts receivable
Notes receivable
Inventory
Supplies
Prepaid expenses
Long term investments
Equipment
Buildings
Land
Intangibles
Liabilities - Answers :Are dents or obligations of the business that result from past
transactions.
Accounts payable
Accrued expenses
Note payable
Taxes payable
Unearned revenue
Bonds payable
Equity - Answers :The amount of financing provided by owners of the business and
earnings.
Contributed capital
Retained earnings
, How do you calculate Stockholders' Equity? - Answers :Stockholders' Equity = Common
Stock + Retained Earnings
Income Statement - Answers :Reports the accountant's primary measure of
performance of a business, revenues less expenses during the accounting period.
Revenues - Expenses = Net Income
Revenue - Answers :Earnings from the sale of goods and services.
Sales revenue
Fee revenue
Interest revenue
Rent revenue
Service revenue
Expenses - Answers :Dollar amount of resources used up by the entity to earn revenues
during a period.
Cost of goods sold
Wages expense
Rent expense
Interest expense
Depreciation expense Advertising expense
Insurance expense
Repair expense
Income tax expense
Net Income/Net Earnings - Answers :Revenues earned minus expenses incurred.
Statement of Stockholders' Equity - Answers :Reports the changes in each of the
company's stockholders' equity accounts, including the change in the retained earnings
balance caused by net income and dividends, during the reporting period.
Common stock
Retained earnings
Additional paid-in-capital
Beginning Retained Earnings + Net Income - Dividends Declared = Ending Retained
Earnings
-Creditors closely monitor a firm's statement of stockholders equity because the firm's
policy of dividend payments to the stockholders affects its ability to repay its debts.
-Investors examine retained earnings to determine whether the company is reinvesting
a sufficient portion of earnings to support future growth.
4 Basic Financial Statements - Answers :Balance Sheet, Income Statement, Statement
of Stockholders Equity, Statement of Cash Flows
Balance Sheet - Answers :Reports the financial position (amount of assets, liabilities,
and stockholders equity) of an accounting entity at a particular point in time.
(Snapshot of financial position)
Format: Company name, title, specific date, unit of measure
Balance Sheet Equation - Answers :Assets = Liabilities + Stockholders' Equity
Assets - Answers :Economic resources owned by the business as a result of past
transactions.
Cash
Short term investments
Accounts receivable
Notes receivable
Inventory
Supplies
Prepaid expenses
Long term investments
Equipment
Buildings
Land
Intangibles
Liabilities - Answers :Are dents or obligations of the business that result from past
transactions.
Accounts payable
Accrued expenses
Note payable
Taxes payable
Unearned revenue
Bonds payable
Equity - Answers :The amount of financing provided by owners of the business and
earnings.
Contributed capital
Retained earnings
, How do you calculate Stockholders' Equity? - Answers :Stockholders' Equity = Common
Stock + Retained Earnings
Income Statement - Answers :Reports the accountant's primary measure of
performance of a business, revenues less expenses during the accounting period.
Revenues - Expenses = Net Income
Revenue - Answers :Earnings from the sale of goods and services.
Sales revenue
Fee revenue
Interest revenue
Rent revenue
Service revenue
Expenses - Answers :Dollar amount of resources used up by the entity to earn revenues
during a period.
Cost of goods sold
Wages expense
Rent expense
Interest expense
Depreciation expense Advertising expense
Insurance expense
Repair expense
Income tax expense
Net Income/Net Earnings - Answers :Revenues earned minus expenses incurred.
Statement of Stockholders' Equity - Answers :Reports the changes in each of the
company's stockholders' equity accounts, including the change in the retained earnings
balance caused by net income and dividends, during the reporting period.
Common stock
Retained earnings
Additional paid-in-capital
Beginning Retained Earnings + Net Income - Dividends Declared = Ending Retained
Earnings
-Creditors closely monitor a firm's statement of stockholders equity because the firm's
policy of dividend payments to the stockholders affects its ability to repay its debts.
-Investors examine retained earnings to determine whether the company is reinvesting
a sufficient portion of earnings to support future growth.
