Financial Statement & Analysis Ch. 1, 3 &4

What is the primary purpose of a balance sheet?

• To show the company's revenue and expenses

• To display the financial position of a company at a specific point in time

• To record the company's transactions over a period

• To outline the company's future financial plans

What equation best represents the accounting equation?

• Assets + Liabilities = Stockholders’ Equity

• Assets - Liabilities = Stockholders’ Equity

• Assets = Liabilities + Stockholders’ Equity

•    Assets + Stockholders’ Equity = Liabilities

What is the primary purpose of the income statement?

• To show the financial position of a company at a specific point in time.

• To summarize the company's revenues, expenses, and net income over a specific period.

• To display the company's cash inflows and outflows over a specific period.

• To reconcile the beginning and ending balances of the company's equity accounts.

The gross profit is calculated as:

• Net Sales - Operating Expenses

• Net Sales - Cost of Goods Sold

• Total Revenues - Total Expenses

• Operating Income - Interest Expense

What does GAAP stand for?

• Generally Accepted Accounting Procedures

• Generally Accepted Accounting Policies

• General Accounting and Auditing Practices

• Generally Accepted Accounting Principles

The multiple-step income statement separates:

• Operating and non-operating activities only

• Gross profit, operating income, and net income

• Only extraordinary items from regular business operations

• Investments from financing activities

Which of the following would typically be classified as a current liability?

• Mortgage payable

• Bonds payable in 10 years

• Accounts payable

• Deferred income taxes

The balance sheet is also known as:

• The statement of financial position

• The income statements

• The statement of cash flows

• The statement of comprehensive income

What are the three major sections of a balance sheet?

• Revenue, Expenses, Net Income

• Assets, Liabilities, Stockholders' Equity

• Current Assets, Long-Term Assets, Depreciation

• Operating Activities, Investing Activities, Financing Activities

The matching principle requires that expenses be recognized in the same period as the related revenues.

• True

• False