Chapter 1
What are the 4 main financial statements covered in this course?
1. Income Statement
2. Retained Earnings/Owners' Equity Statement
3. Balance Sheet
4. Cash flow Statement
What are the four categories within the asset section of the classified balance sheet in order of liquidity?
1. Current Assets
2.Long term Investments
3. Property Plant and Equipment
4. Intangible Assets
What does the basic accounting equation state?
Assets=Liabilities+Equity
What are the two line items that make up the equity section on the classified balance sheet?
1. Retained Earnings
2. Paid in Capital (common stock)
Explain how the the financial statements are related to one another?
1. Income Statement leads to Net Income
2. Net income is used in retained earnings statement to determine ending retained earnings
3. Retained earnings is posted on the balance sheet
What are the 2 fundamental qualities useful information should possess?
1. Relevance
2. Faithful Representation
Which cash flow activity would deal with purchasing a truck?
Investing
Going concern assumption
What are the 4 opinions that are issued in an auditors report in order of best to worst?
1. Unqualified
2. Qualified
3. Disclaimer
4. Adverse
Name 2 Liquidity ratios and state their formulas?
1. Working capital= current assets-current liabilities
2. Current Ratio= current assets/current liabilities