Accounting 101
What is Asset, Liability, Owners Capital
Benefits
Obligations
Claim of owner
Depreciation is recorded because assets ______ over time.
are used/loose value
Which method assumes “latest goods purchased are sold first”?
LIFO
These are the activities involved in Cash Flow Statement
1)Operating Activities
2) Investing Activites
3) Financing Acitivies
When a business buys a computer with cash, its cash ______, but its computer equipment ________
decreases and increases
What is the purpose of accounting
Is to 1)identify, 2)record and 3)communicate financial information?
Which method records equal expense every year?
Straight Line method
Inventory appears on which financial statement?
Balance Sheet
Payment of dividends is part of which section of CFS?
Financing Activity
In addition to an owner, these people also have claims against a company's assets.
creditors
What are the financial statements?
1) Balance Sheet
2) Profit & Loss Statement
3) Cash Flow Statement
A machine costing ₹10,00,000 with a 5-year life and ₹1,00,000 salvage value. Using straight-line depreciation, annual depreciation = ?
180000
If Ending Inventory is undervalued, Net Income will be ______
Undervalued
Sale of land for cash appears in which section of Cash Flow Statement?
Investing Activites
If a business closes, the claims of these shareholders are settled first.
Preference Shareholders
If a company’s Current Ratio is 0.8, what does it signal?
Current assets are lower than current liabilities
Which depreciation method is based on actual usage of the asset?
Unit of Production method
Company had Opening Inventory ₹50,000, Purchases ₹1,50,000, Closing Inventory ₹40,000. Cost of Goods Sold = ?
160000
Repayment of loan via issuing additional shares
Non-Cash item
A company has:
Net Profit Margin = 10%
Asset Turnover = 2
Equity Multiplier = 1.5
Using the DuPont framework, calculate the company’s Return on Equity (ROE).
30%
These are the 2 ways the fundamental accounting equation is stated.
Assets = Liabilities + Equity
Assets -Liabilities = Equity
Why does depreciation appear in the Operating Cash Flow section of CFS even though it’s non-cash?
Beacuse it reduce profits but not cash
If prices are rising, which method (FIFO or LIFO) gives higher profit?
FIFO
Net income = ₹5,00,000, Depreciation = ₹50,000, Increase in Accounts Receivable = ₹30,000. What’s the Operating Cash Flow?
520000
Distinguish between ROA and ROE in terms of stakeholder perspective.
ROA - Efficiency of Assets
ROE - Return on Equity