Financial Accounting final

Question 1

Statement of owners equity

Answer 1

Beginning capital + owners investment + net income - withdrawals

Question 2

Income statement

Answer 2

Revenue - expense = net income

Question 3

Balance sheet

Answer 3

Assets = liability + equity; describes company’s financial state

Question 4

Cost/Measurement Principle

Answer 4

Accounting information is based on actual cost which is objective

Question 5

Revenue Recognition Principle

Answer 5

Recognise revenue when goods or services are provided to an expected amount

Question 6

Expense recognition principle

Answer 6

A company records its expenses incurred to generate revenue reported

Question 7

Accounting equation

Answer 7

Assets = liabilities + equity

Question 8

Calculate return on asset

Answer 8

Net Income / Average Total Assets

Question 9

Normal Balances

Answer 9

A normal balance refers to the debit or credit balance that’s normally expected from a certain account

Question 10

Calculate the change in owners equity

Answer 10

Beginning capital + owners investment + net income - withdrawals

Question 11

Calculate debt ratio

Answer 11

Total Liabilities / Total

Question 12

Calculate net income

Answer 12

Revenue - Expenses

Question 13

What order are financial statements prepared

Answer 13

Income statement, owners equity, balance sheet, statement of cash flow

Question 14

Calculate profit margin

Answer 14

Net income / Net Sales

Question 15

Permanent / Temporary Accounts

Answer 15

Temporary accounts accumulate data related to one accounting period - income statement, owner withdrawals, expenses
Permanent accounts - Report om activities related to one or more future accounting periods - Liabilities, assets, owners capital

Question 16

Four step closing entries

Answer 16

Close revenue account and credit income summary
Close expense account and debit income summary
Close income summary and credit capital account
Close withdrawals account and debit capital account

Question 17

Classified balance sheet

Answer 17

organises assets and liabilities into subgroups that provide more info to decision makers

Question 18

Current assets

Answer 18

Assets expected to be sold, collected or used within one year or company’s operating cycle

Question 19

Current Ratio

Answer 19

Current Assets / Current Liabilities

Question 20

Calculate gross margin and gross margin ratio

Answer 20

Net sales - COGS / Net Sales

Question 21

Calculate net sales

Answer 21

(Total units sold x sales per unit price) - sales returns - allowances - discounts

Question 22

Single step income statement

Answer 22

Lists cost of goods sold as another expense and shows only one subtotal for total expenses. Expenses are grouped into a few, if any, categories

Question 23

Multi-step income statement

Answer 23

Details computation of net sales and expenses and reports subtotals for various items

Question 24

FOB shipping point, destination point and consignment

Answer 24

FOB Shipping point - goods included in buyers inventory when shipped
FOB Destination - goods included in buyers inventory after arrival at destination
Goods on consignment are goods shipped by the owner, called the consignors to another party, the consignee

Question 25

LIFO conformity rule

Answer 25

If LIFO used for tax purposes it also must be used to compute income for financial statements

Question 26

Inventory turnover

Answer 26

COGS / average inventory

Question 27

Days sales outstanding

Answer 27

Accounts receivable / net sales x 365

Question 28

Calculate FIFO inventory value

Answer 28

Sell first inventory price first - less expensive

Question 29

Calculate LIFO - sell last inventory first