Mgt 4 Financial Accounting Assessment #1

Statement of stockholders’ equity

Change in owners’ claims to resources.

Balance sheet

Resources equal creditors’ and owners’ claims to those resources

Add: Net Income

when the company earned a profit during the period, Net income increases stockholders’ equity

Less: Net Loss

when the company lost money during the period.

Net loss reduces retained earnings

less: net income, add: net loss

almost always wrong

Less: Dividends

• normal and correct way to show dividends.

• You subtract dividends because they decrease retained earning

add: dividends

wrong

Is common stock credit or debit?

credit

notes payable

written promissory legal note- formal agreement

involves interest

accounts payable

short term, informal, no interest, goods/services purchased on credit

In accrual accounting, when is revenue recognized?

when it is earned (when service is provided) or incurred (when cost has been realized/work is completed), not necessarily when the cash is received, or when order is placed.

when is it no journal entry?

The transaction has not yet occurred & No financial impact has occurred yet

is deferred revenue an asset or liability?

liability