Completing the Accounting Cycle - Financial Statements Example

This video tutorial covers the completion of the accounting cycle by preparing financial statements. It begins with a recap of previous chapters and then explains how to create an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flow. The tutorial emphasizes the importance of understanding revenues, expenses, assets, liabilities, and equity, and how they are represented in financial statements. The use of a cash T table is highlighted for simplifying the statement of cash flow.

What are the two types of revenues mentioned in the income statement?

• Sales revenue and interest revenue

• Consulting revenue and interest revenue

• Interest revenue and dividend revenue

• Consulting revenue and sales revenue

How is the ending retained earnings calculated?

• By subtracting expenses from revenues

• By adding net income to beginning retained earnings

• By subtracting dividends from net income

• By adding net income and subtracting dividends from beginning retained earnings

Which of the following is NOT a component of the balance sheet?

• Equity

• Liabilities

• Net income

• Assets

What ensures that the balance sheet is correct?

• Total assets equal total liabilities

• Total liabilities equal total equity

• Total assets equal the sum of liabilities and equity

• Total equity equals total assets

What does the statement of cash flows show?

• The assets, liabilities, and equity of a company

• The net income and retained earnings of a company

• The total revenue and expenses of a company

• How cash is generated and used in operating, investing, and financing activities

Which activity is NOT part of the cash flow statement?

• Investing activities

• Operating activities

• Financing activities

• Marketing activities

What is the purpose of the cash T-table in the statement of cash flows?

• To verify the cash flow statement by tracking cash inflows and outflows

• To determine the ending retained earnings

• To list all assets and liabilities

• To calculate net income