FSU ACG 2021 - Financial Accounting Final Exam Cumulative

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Financial Accounting Final Exam Cumulative (Chapters 1 – 11)Chapter 1 The four financial statements The Income Statement Measures a company’s financial performance over a specific accounting period This statement shows the results of the given year Dated: “For Period Ending MM/DD/YY” Has two main categories- Revenues & Gains- Expenses & Loses Revenues – Expenses = Net Income  If revenues > expenses, net income will be positive If revenues < expenses, net income will be negative Net income will go to either:- Dividends- Retained Earnings The Income Statement is prepared first, before the other three financial statements The Statement of Retained Earnings Retained Earnings represent the portion of the Net Income that the firm has kept (opposed to paying it out in the form of dividends) This amount will accumulate from year to year as the firm continues to retain a portion of net income This statement shows the profits we have made and not paid out to the owners Dated: “For Period Ending: MM/DD/YY” Ending Retained Earnings = Beginning Retained Earnings + Net Income – Dividends (basically) Ending = Beginning + What goes IN – What goes OUT The Statement of Retained Earnings is prepared second, after the Income Statement, since we need the Net Income from the Income Statement in order to prepare this statement Dividends are NOT an expense!  The three components of Retained Earnings are:- Revenues- Expenses- Dividends How does each of the following impact Retained Earnings?- Revenues Increase, so Retained Earnings ________ (increase)- Expenses Increase, so Retained Earnings _________(decrease)- Dividends Increase, so Retained Earnings _________(decrease) The Balance Sheet The Balance Sheet reports the firm’s assets, liabilities, and equity Dated: A specific date/point in time The Balance Sheet is prepared third (after the Income Statement and Statement of Retained Earnings) since we need the ending balance from Retained Earnings to prepare this statement Assets = Liabilities + Stockholder’s Equity Assets- Economic Resources used to produce future benefits- Items the firm owns and uses in its business- Basically, they are what you (the company) owns, and what you are owed- Types of assets: Current Assets are expected to be converted to cash, sold or consumed in the next year or next business cycle, whichever is longer Current Assets are things like: Cash Short-term Investments Accounts/Notes Receivables _______ Receivables Inventory and Supplies Prepaid Expenses Long-term Assets will be held longer than one year Long-term Assets are things like: Property, Plant, and Equipment (PPE) Land, buildings, computers, etc Intangibles (things with no physical substance) Long-term Investments Liabilities- Outside claims and debts owed to others-What you (the company) owe - Types of liabilities: Current Liabilities are obligations payable in the next year or within the next business cycle Types of Current Liabilities: Accounts Payable _______ Payables  Accrued Expenses Unearned Revenue (this is not part of Retained Earnings) Long-term Liabilities are obligations payable more than one year from now Types of Long-term Liabilities: Long-term Notes Payable Bonds Payable Stockholder’s Equity- Insider claims, ownership by stockholders- Net worth- Types of Stockholder’s Equity: Common Stock represents the amount shareholders have invested Retained Earnings represents the amounts earned and kept by the business This amount come from the Statement of Retained Earnings The Statement of Cash Flows Records the amount of cash coming in and going out of the business Dated: “For Period Ending: “MM/DD/YYYY” Three sections:- Operating Cash in and out of the business from operations, which is the selling of goods and services, from interest and receiving dividends Day to day activities; anything dealing with revenues or expenses So basically: Revenues and Expenses, Interest, Receiving Dividends- Investing Cash in and out of the business from the purchase and sale of long-term assets and from investing in other companies Buying and selling land, equipment, and buildings- Financing Cash in and out of the business from borrowing money or paying back money that was borrowed and from paying dividends Prepared last out of the four financial statements, after the Income Statement, Statement ofRetained Earnings, and the Balance Sheet, since we need the Cash Balance from the BalanceSheet to prepare this statementChapter One in Review:Remember that receivables are assetsRemember that payables are liabilitiesEvery transaction affects something on the balance sheetNot every transaction affects the income statementNet Income increases retained earnings; expenses lower net income which lowers retained earningsDo 1st : Income Statement then 2nd : Statement of Retained Earnings then 3rd : Balance Sheet then 4th : Statement of Cash FlowsA number written in () is negative  -300 and (300) is the same thingChapter 2 The Classified Balance Sheet Groups together similar assets and similar liabilities Current Assets are assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer The operating cycle is the average time that it takes to go from cash to cash in producing revenue Long-term investments/assets are generally investments in stocks and bonds of other corporations Property, Plant, and Equipment are assets with relatively long and useful lives Intangible assets do not have physical substance(goodwill, patents, copyrights, etc) Current Liabilities are obligations that the company is to pay within the coming year or operating cycle Long-term Liabilities are expected to be paid after one year GAAP – Generally Accepted Accounting Principles The primary GAAP rule is that accrual accounting is used Accrual Accounting – basically all of the major companies operating in the U.S. use accrual accounting Timing Issues: Transactions recorded in the period which the event occur Revenue Recognition Principle:- Revenues are recognized when earned, not when cash is actually received  Expenses are recognized when incurred, not when paid Matching Principle: - Expenses are matched with revenues -


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FSU ACG 2021 - Financial Accounting Final Exam Cumulative

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