Better UTA set

If net income after tax is $42,000, the tax rate is 30%, and total expenses not including tax expense are $126,000, revenues must be:

$186,000

Find what the net income was before taxes and add it to expenses to get the total revenue.

The financial statement that reports what the company owns and what the company owes is the

balance sheet

The balance sheet shows assets, liabilities, and equity which show what is owned and what is owed.

What is supposed to "balance" on the balance sheet?

assets = liabilities + owner's equity

The purpose of financial accounting is to provide

financial information to external users

The accounting equation is

assets = liabilities + equity

Which financial statement provides information related to the financial performance of a company during a specific period?

income statement

The income statement reports earning for a company during a specific time period.

A company reports net income when

services provided are greater than the cost to provide the services

Which of the following is considered and expense?

prepaid expense
cost of goods sold
sales
building

cost of goods sold

The government agency with legal authority over financial reporting of U.S. public companies is called

securities exchange commission (SEC)

FASB has no legal authority

Which financial statement reports dividends paid to shareholders?

statement of owners equity

Dividends are not reported on the income statement, it is not an expense. They are netted into retained earnings on the balance sheet.

assets typically include

accounts receivable and equipment

What financial document is for the specific purpose of reporting cash flows?

cash flow statement

Which statement provides information on goods and services provided to customers?

income statement

Providing goods and services to customers is revenues which is only on the income statement.

Liabilities are

obligations resulting from past transactions

Prepaid expenses is an asset because

the company owns it
the company has paid ahead and therefore has future benefit
a past transaction has occurred

Economic resources is the technical term for

assets

An examination of accounting records to determine if the records and reports are in accordance with generally accepted accounting standards is called

an audit

What increases retained earnings?

revenues

retained earnings is increased by net income.

Which financial statement reports what the company owes suppliers?

balance sheet

Which of the following is not a liability?

unearned revenues
accounts payable
taxes payable
sales

sales

The purpose of Financial Accounting is to: (3)

record, summarize, and report transactions of the company

4 primary financial statements

balance sheet, income statement, statement of stockholder's equity, and statement of cash flows

Balance Sheet

States what your business owns (assets) and owes (liabilities) on a specific date. Assets minus liabilities is the amount owed.

Income Statement

Shows how much the business earned during a period of time. this is what you have earned from providing goods and services less what it costs.

Statements of Owner's Equity

shows the activity of shareholder's (owners) during a period of time. Shows receipt of funds from shareholders and payments back to shareholders in the form of dividends. shows the earnings of the business that go to the shareholders

Cash Flow Statement

Shows the source of cash and what the cash was used for during a period of time (cash and income are not the same)

Retained Earnings

the amount of cumulative profits and losses kept by the company since the first day of operations.

Beginning Retained Earnings
+Net Income or -Net Loss
-Dividends paid
=Ending Retained Earnings

Cash flow statement sections

operating activities, investing activities, financing activities.

Operating Activities (statement of cash flows)

directly related earnings from day to day business operations. Net income, current assets and current liabilities (less than 1 year)

Investing Activities (statement of cash flows)

directly related to buying and selling assets used long term in the business (use more than 1 year)

Financing Activities (statement of cash flows)

directly related to borrowing and repaying debt and receipts and payments from/to owners (pay later than 1 year)

Elements of Financial Statements

assets, liabilities, stockholders equity, revenues, expenses

Asset

The company's economic resources to operate business.
probable future economic benefit
owned or controlled by the company
resulting from a past transaction, something that has already occurred

Liability

The company's debts and obligations
probable use of a future economic benefit (a asset)
owed
resulting from a past transaction

Stockholder's Equity

Earnings kept in the company / financing provided by the owners
owners contributions to the company
less dividends paid to owners
plus profits and less losses (net income)
also equal to total assets less total liabilities

Revenues

Earned from providing goods or services in exchange for an asset
This is the amount the customer is expected to pay for the goods or services they received
A revenue occurs when the good/service is provided to the customer regardless of whether the customer has paid or not.

Expenses

Using an asset of the company to provide goods or services
What it costs the company to provide the goods or services to
the customer
A service or good is provided to the company that the company
will have to pay for.
The expense occurs when the company
receives the service or the asset is used up, not when the
company pays for it.

The Accounting Equation

Assets = Liabilities + Stockholders' Equity

FASB

Financial Accounting Standards Board, is the primary accounting standards setting authority in the US

IASB

International Accounting Standards Board, is the primary accounting standards setting authority for several countries outside of the US

SEC

Securities and Exchange Commission, the government agency that oversees US financial markets and accounting standards for public companies

3 types of footnotes

provides a description of the accounting rules followed
provides more details for the items listed on the financial statements
provides information on things not listed on the financial statements

Auditor's Report

A professional accountant examines the company's financial statements and gives a report that determines if the statements are fairly stated in accordance with GAAP.

Accrued Expenses

is an account representing all unpaid financial obligations incurred by the organization, liability

Trademarks (A, L, O, R, or E)

Asset

Investments (A, L, O, R, or E)

Asset

Dividends paid (A, L, O, R, or E)

Owner's Equity

Proceeds from selling Equipment (O, I, or F)

Investment

Pay dividends to shareholders (O, I, or F)

Financing

Collect dividends from investments (O, I, or F)

Operating

Revenue reported on the income statement would be equal to

the value of services provided during the period

Rent expense reported on the income statement represents

the service that was provided to the company

The notes to the financial statements provide

the financial accounting principles followed by the company

A company reports $200,000 total assets, $60,000 total equity and $180,000 total revenues. What are total liabilities?

$140,000

A business records revenues when

it provides goods and services to customers

The most common way that a business communicates the results of operation is

financial statements

The financial statement that reports the financial position of a business on a certain date is the

balance sheet

Which of the following items is a revenue?

interest earned
interest paid
collections from customers
paying for an expense before it is provided

interest earned

The reason a company has an audit is

to lend credibility to the financial information

The Financial Accounting Standards Board

provides general guidance on accounting

An expense is

cost of providing goods and services

Financial accounting

records all transactions and reports a summary of transactions

Who is responsible for the financial statements provided by the company?

Management

Which of the following is not considered an expense?

prepaid expenses

Determine the financial statement the following accounts are reported on: (B, I, or C)
a. inventory
b. prepaid expenses
c. sales
d. COGS
e. cash
f. accounts payable
g. accrued expenses
h. cash from operations
i. accounts receivable
j. interest revenue
k. notes payable
l. dividends paid
m. rent expense
n. taxes payable
o. accumulated depreciation

a. Balance sheet - asset
b. Balance sheet - asset
c. Income statement - revenue
d. Income statement - expense
e. Balance sheet - asset
f. Balance sheet - liability
g. Balance sheet - liability
h. Cash flow statement
i. Balance sheet - asset
j. Income statement - revenue
k. Balance sheet - liability
l. Cash flow statement
m. Income statement - expense
n. Balance sheet - liability
o. Balance sheet - with property/plant/eq

State two items that would be reported on each of the 3 sections on the cash flow statement:
a. Operating activities
b. Investing activities
c. Financing activities

a. cash from customers, cash paid to suppliers, cash paid for any other expenses, cash received from investments, a change to a current asset or liability
b. cash used to purchase or cash received from selling all long term assets such as property, plant, equipment, intangible assets, L/T notes receivable or L/T investments
c. cash received from borrowing a long term liability or cash used to repay all long term liabilities, cash received from or paid to shareholders

The balance sheet reports

economic resources and claims to those resources

Which of the following is not true?

assets=liabilities+equity
liabilities=assets-equity
equity=assets-liabilities
assets+liabilities=equity

assets+liabilities=equity

What would be an appropriate heading for a balance sheet?

as of December 31, 2XXX

An investor looking to determine the financial strength of a company as of a certain date would use which financial statement?

balance sheet

What are the categories reported on an income statement?

revenues and expenses

Which of the following statements is true relative to the statement of cash flows?

it shows the financial resources a company owns
it shows the amount of services a company provided
it shows the amount owed by the company
it shows the amount spent for long term assets

it shows the amount spent for long term assets

The difference in revenues and expenses during a specific period of time is

net income

The price of goods or services provided in exchange for an asset is called

revenue

Total owner's equity is increased when

services provided is more than the cost of providing services

What account is used to record cash collection in the period after goods are provided?

accounts receivable

Taxes payable is reported on the balance sheet as

liability

A company had assets of $230,000 and liabilities of $145,000 at the beginning of the year. During the year the company earned $45,000 and reduced what it owed by $22,000. What is total assets at the end of the year?

$253,000

The company received bills for services provided to them during this month totaling $11,800 and paid bills this month totaling $13,600. What will be reported as expenses for this month?

$11,800

The company provided goods to customers totaling $34,800 and collected payments from customers this month in the amount of $39,200. What will be reported as revenues for this month?

$34,800

Cash transactions related to common stock are reported in which section of the cash flow statement?

financing

common stock is an owner's equity account. Transactions related to owners are reported in the financing section of the cash flow statement.

State whether each of the following is and asset, liability, stockholder's equity, revenue, or an expense

1. Paid for advertising run this month
2. Amounts that the the company owes for utilities
3. Buildings
4. Items held only to sell to a customer
5. A customer pays for a service provided at the time it is provided
6. Paying expenses before they are used
7. Patents
8. The cost of inventory that was sold to customers
9. Total profits and losses for all periods
10. Earning interest on investments this period

1. expense
2. liability
3. asset
4. asset
5. revenue
6. asset
7. asset
8. expense
9. stockholder's equity
10. revenue

Which of the following statements related to generally accepted accounting principles is trues?

it is government law that must be followed
it is a never changing set of principles
it is determined by government regulators
it is a set of principles and guidelines at a given point in time

it is a set of principles and guidelines at a given point in time

External users of financial statement do not include

stockholders
lenders
investors
board of directors

board of directors

An accounting system is used to provide information for who? (3)

internal management, external shareholders, government regulators

An audit report is issued by

a certified public accountant

Determine expenses for the period given the company had the following:

Retained earnings, beginning = $2,000
Revenues this period = $8,000
Retained earnings, ending = 5,000
Dividends paid this period = $1,000

$4,000

When total assets decrease and liabilities and common stock do not change and there are no dividends paid

revenues are less than expenses

A company spent cash to purchase equipment. This transaction results in

trading one asset for another, so all stays the same, the accounts of the asset just change

A company provided services and will be paid next period. The transaction results in

total assets and revenue (equity) increases

Which cash flow is an operating activity?

purchase of long term assets
repayment of long term debt
collecting cash from customers
paying a dividend to shareholders

collecting cash from customers

A company earned $5,000 in revenues, collected $7,500 from customers and paid $3,000 for expenses incurred this period. What will be reported on the financial statements for this period?

Equity and assets are increased

Which of the following would not be a statement that reports services provided and the cost of providing services?

statement of income
statement of earnings
statement of financial position
statement of operations

statement of financial position

Statement of Financial Position

balance sheet

other names for the income statement (3)

statement of income
statement of earnings
statement of operations

A balance sheet reports cash of $3,000, accrued expenses of $1,300, equipment of $10,000 and common stock of $2,500. Retained earnings must be:

$9,200