Accounting Cycle - Pt 2

This video tutorial covers the process of creating an adjusted trial balance and financial statements, including a multi-step income statement, statement of retained earnings, balance sheet, and statement of cash flow. The tutorial emphasizes the importance of understanding the accounting cycle and provides detailed explanations of each financial statement component, ensuring that debits and credits are balanced and that all financial activities are accurately recorded.

What is the purpose of an adjusted trial balance?

• To list all accounts and their balances on the correct side

• To determine the company's market value

• To calculate net income

• To prepare the cash flow statement

How is net sales calculated in the income statement?

• By adding operating expenses to sales revenue

• By subtracting discounts and returns from sales revenue

• By multiplying sales revenue by the tax rate

• By dividing sales revenue by the number of products sold

What is the significance of operating income?

• It measures the company's market share

• It indicates the company's profitability from core operations

• It reflects the company's total expenses

• It shows the company's total revenue

Which of the following is considered a non-operating activity?

• Interest expense

• Sales revenue

• Administrative expenses

• Cost of goods sold

Why are retained earnings initially set to zero?

• Because the company has no assets

• Because it is the first year of business

• Because the company has no revenue

• Because the company has no liabilities

What must be true for a balance sheet to be correct?

• Assets must be less than equity

• Equity must be greater than liabilities

• Liabilities must exceed assets

• Assets must equal liabilities and equity

Which category does cash received from the sale of land fall under in the cash flow statement?

• Non-operating activities

• Financing activities

• Investing activities

• Operating activities

What is the net cash flow from operating activities?

• 45000

• 2500

• 1360

• 48860

How is the ending cash balance calculated?

• By dividing total revenue by total expenses

• By subtracting liabilities from assets

• By adding net cash flows to the beginning cash balance

• By multiplying net income by the tax rate

In the statement of cash flows, where is interest expense categorized?

• Non-operating activities

• Financing activities

• Investing activities

• Operating activities