Chapter 1
What is the basic accounting equation?
Assets=Liabilities+Equity
Accumulated depreciation would fall under what section of the classified balance sheet?
Property plant and equipment
Name three accounts that have debit balances
dividends
expenses
assets
What are the 4 main financial statements required for external reporting?
1.) Income Statement
2.) Retained Earnings Statement
3.) Balance Sheet
4.) Statement of Cash Flows
Which two items make up the stockholders' equity section on the classified balance sheet?
1.) common stock
2.) retained earnings
name three accounts that have credit balances
liabilities
owners equity
revenues
Name 2 advantages of a corporation
1.) Easier to raise funds
2.) No personal liability
3.) Easier to transfer ownership
What is the order of items listed in the assets section of the classified balance sheet in order of most to least liquid?
1.) current assets
2.) long term investments
3.) PPE
4.) Intangible assets
what is the journal that would be recorded if a company has performed a service on account?
debit to account receivable and credit to revenue
what is the correct order in preparing financial statements? i.e. which statement is prepared first to last
1.) Income Statement
2.) Retained Earnings Statement
3.) Balance Sheet
What is the difference between liquidity and solvency?
liquidity- how quickly an asset can be converted to cash and to meet short term obligations
solvency- measure companies abilities to survive over a long period of time
what is posting?
transferring journal entries to ledger accounts
What covers the company's ability to pay near term obligations, its ability to fund operations and and expansion and its results of operation?
Management discussion and analysis
What is the earnings per share formula and what does it measure?
Net income-preferred dividends/average common shares outstanding
*measures profitability
what is a trial balance?
list of accounts and their balances, prove debits and credits equal