BAM – Accounting questions with
verified answers graded A+
Requirements to appear on income statement - ANS ✔1. Must be within the period of the
statement
2. Must affect the company's taxes
Revenue and Costs of Goods Sold - ANS ✔Revenue is the value of the products/services that a
company sells in the period (Year 1 or Year 2), and COGS represents the expenses that are linked
directly to the sale of those products/services.
Operating Expenses: - ANS ✔Items that are
not directly linked to product sales
- employee salaries, rent, marketing,
research and development, as well
as non-cash expenses like Depreciation and Amortization.
Amortization - ANS ✔Paying off debt in fixed schedule
Other Income and Expenses: - ANS ✔This goes between Operating Income and Pre-Tax Income.
Interest shows up here, as well as items such as Gains and Losses when Assets are sold,
Impairment Charges, Write-Downs, and anything else that is not part of the company's core
business operations.
Taxes and Net Income: - ANS ✔Net Income represents the company's "bottom line" - how much
in after-tax profits it has earned. Net Income = Revenue - Expenses - Taxes.
,Write-down - ANS ✔A write-down is the reducing of the book value of an asset because it is
overvalued compared to the market value.
balance sheet - ANS ✔shows the company's resources - its Assets - and how it acquired those
resources - its Liabilities & Equity - at a specific point in time.
Assets - ANS ✔always equal Liabilities + Equity - no exceptions. Asset is an item that will result
in, directly or indirectly, additional cash in the future.
Liability - ANS ✔A Liability is an item that will result in, directly or indirectly, less cash in the
future. Most Liabilities are related to external parties - payments owed to suppliers, or
borrowed money, for example. Liabilities are used to fund a business.
Equity - ANS ✔Equity line items are similar to Liabilities (used to fund a business), but they refer
to the company's own internal operations rather than external parties.
Cash: - ANS ✔just like cash in bank account
Short-Term Investments: - ANS ✔Less liquid than cash - Certificates of Deposit
(CDs) and money-market accounts and such.
Accounts Receivable: - ANS ✔The company has recorded this as revenue on its
Income Statement but hasn't received it in cash yet. It's like an "IOU" from
a customer. And it will turn into cash when the customer pays.
Prepaid Expense: - ANS ✔The company has paid these expenses in cash but hasn't
recorded them as expenses on the Income Statement yet.
, Inventory: - ANS ✔What they need to manufacture and sell products - for a
company like Apple, all the parts that go into iPhones and iPads.
PP&E - ANS ✔Factories, buildings, land, equipment, and anything else that will
last for over a year and contribute to the company's core business.
Other Intangible Assets: - ANS ✔Patents, trademarks, intellectual property...
usually the result of acquisitions. Similar to Goodwill, but this balance
amortizes (decreases) over time as these items "expire.
Long-Term Investments: - ANS ✔Less liquid and longer-lasting investments than
Cash or Short-Term Investments.
Goodwill: - ANS ✔
Accounts Payable: - ANS ✔The company has recorded these
as expenses on the Income Statement, but hasn't yet
paid them out in cash yet - used for one-time items
with specific invoices, such as payment for legal services.
Accrued Expenses: - ANS ✔The company has recorded these as expenses on the Income
Statement, but hasn't yet paid them out in cash yet - used for recurring monthly items without
invoices, such as employee wages, utilities, and rent.
Deferred Revenue: - ANS ✔The company has collected cash in advance from customers for
products/services yet to be delivered, and it will recognize this as real revenue over time.
verified answers graded A+
Requirements to appear on income statement - ANS ✔1. Must be within the period of the
statement
2. Must affect the company's taxes
Revenue and Costs of Goods Sold - ANS ✔Revenue is the value of the products/services that a
company sells in the period (Year 1 or Year 2), and COGS represents the expenses that are linked
directly to the sale of those products/services.
Operating Expenses: - ANS ✔Items that are
not directly linked to product sales
- employee salaries, rent, marketing,
research and development, as well
as non-cash expenses like Depreciation and Amortization.
Amortization - ANS ✔Paying off debt in fixed schedule
Other Income and Expenses: - ANS ✔This goes between Operating Income and Pre-Tax Income.
Interest shows up here, as well as items such as Gains and Losses when Assets are sold,
Impairment Charges, Write-Downs, and anything else that is not part of the company's core
business operations.
Taxes and Net Income: - ANS ✔Net Income represents the company's "bottom line" - how much
in after-tax profits it has earned. Net Income = Revenue - Expenses - Taxes.
,Write-down - ANS ✔A write-down is the reducing of the book value of an asset because it is
overvalued compared to the market value.
balance sheet - ANS ✔shows the company's resources - its Assets - and how it acquired those
resources - its Liabilities & Equity - at a specific point in time.
Assets - ANS ✔always equal Liabilities + Equity - no exceptions. Asset is an item that will result
in, directly or indirectly, additional cash in the future.
Liability - ANS ✔A Liability is an item that will result in, directly or indirectly, less cash in the
future. Most Liabilities are related to external parties - payments owed to suppliers, or
borrowed money, for example. Liabilities are used to fund a business.
Equity - ANS ✔Equity line items are similar to Liabilities (used to fund a business), but they refer
to the company's own internal operations rather than external parties.
Cash: - ANS ✔just like cash in bank account
Short-Term Investments: - ANS ✔Less liquid than cash - Certificates of Deposit
(CDs) and money-market accounts and such.
Accounts Receivable: - ANS ✔The company has recorded this as revenue on its
Income Statement but hasn't received it in cash yet. It's like an "IOU" from
a customer. And it will turn into cash when the customer pays.
Prepaid Expense: - ANS ✔The company has paid these expenses in cash but hasn't
recorded them as expenses on the Income Statement yet.
, Inventory: - ANS ✔What they need to manufacture and sell products - for a
company like Apple, all the parts that go into iPhones and iPads.
PP&E - ANS ✔Factories, buildings, land, equipment, and anything else that will
last for over a year and contribute to the company's core business.
Other Intangible Assets: - ANS ✔Patents, trademarks, intellectual property...
usually the result of acquisitions. Similar to Goodwill, but this balance
amortizes (decreases) over time as these items "expire.
Long-Term Investments: - ANS ✔Less liquid and longer-lasting investments than
Cash or Short-Term Investments.
Goodwill: - ANS ✔
Accounts Payable: - ANS ✔The company has recorded these
as expenses on the Income Statement, but hasn't yet
paid them out in cash yet - used for one-time items
with specific invoices, such as payment for legal services.
Accrued Expenses: - ANS ✔The company has recorded these as expenses on the Income
Statement, but hasn't yet paid them out in cash yet - used for recurring monthly items without
invoices, such as employee wages, utilities, and rent.
Deferred Revenue: - ANS ✔The company has collected cash in advance from customers for
products/services yet to be delivered, and it will recognize this as real revenue over time.
