Financial Statements
What is the purpose of the balance sheet?
To show a company’s financial position at a specific point in time.
What is the effect of a debit on an asset account?
It increases the balance.
What is the accounting equation?
Assets = Liabilities + Equity.
What is included in the income statement?
Revenues, expenses, and profits/losses.
How does a credit affect a liability account?
It increases the balance.
Who are the main users of financial accounting information?
Creditors and investors
How does the cash flow statement differ from the income statement?
The cash flow statement shows cash inflows and outflows, while the income statement shows profitability over a period.
What happens to equity when you credit an equity account?
It increases the equity.
What is the purpose of a journal entry?
To record financial transactions in the accounting system.
What are the three main sections of the cash flow statement?
Operating activities, investing activities, and financing activities.
If a company purchases equipment on credit, how are the accounts affected?
Equipment (an asset) is debited, and accounts payable (a liability) is credited.
What is the difference between current and non-current assets?
Current assets are expected to be converted into cash or used up within one year, while non-current assets are held for longer periods.