Understanding the Four Financial Statements

Which of the following is NOT one of the four financial statements required by GAAP?

• Balance Sheet

• Income Statement

• Statement of Cash Flows

• Statement of Financial Activities

What does the Balance Sheet represent?

• Revenues minus expenses for a given time period

• Statement of financial position at a given point in time

• Sources and uses of cash

• Changes in retained earnings

Which equation represents the fundamental accounting model?

• Ending Equity = Beginning Equity + Investments - Withdrawals + Income

• Sources of Cash - Uses of Cash = Change in Cash Balance

• Net Income = Revenue - Expenses

• Assets = Liabilities + Equity

Which of the following is considered a current asset?

• Equipment

• Accounts Receivable

• Buildings

• Land

What is the primary purpose of the Income Statement?

• To report the resources of the entity

• To present the results of the entity's operations during a period of time

• To summarize sources and uses of cash

• To explain changes in retained earnings

In a corporation, what is included in stockholders' equity?

• Cash and Marketable Securities

• Common Stock, Preferred Stock, and Retained Earnings

• Accounts Payable and Notes Payable

• Revenue and Expenses

What does the Statement of Cash Flows provide information about?

• Operating, Investing, and Financing activities

• Net Income

• Assets and Liabilities

• Owner's Equity

Which of the following is a long-term liability?

• Mortgages Payable

• Accounts Payable

• Notes Payable

• Interest Payable

What is the simplest equation to describe net income?

• Net Income = Equity + Liabilities

• Net Income = Assets - Liabilities

• Net Income = Revenue - Expenses

• Net Income = Cash Inflows - Cash Outflows

What is the purpose of the Statement of Owners' Equity?

• To summarize sources and uses of cash

• To explain the changes in retained earnings

• To present the results of operations during a period of time

• To report the financial position at a given point in time