MGT 6201 ACCOUNTING ALL SET A ANSWERS AND
QUESTIONS SET A+
Required Financial Statements - ✔✔· Balance Sheet
· Income Statement
· Statement of Shareholders' Equity
· Statement of Cash flows
· Statement of Comprehensive Income
✔✔Financial Statement Footnotes - ✔✔o Additional details of figures found in financial
statements
✔✔Independent Auditor Report - ✔✔o Auditor expressing if financial statements are
done appropriately
✔✔Management Discussion and Analysis (MD&A) - ✔✔o Management talking about
what happened in the past period and what they think will happen in the future
o Relevant but not reliable because this letter doesn't require GAAP practices
✔✔Balance Sheet - ✔✔describes the sources and uses of funds of a firm at a point in
time. Useful for:
· Evaluating capital structure
· Assessing risk and future cash flows
✔✔Assets - ✔✔Economic resources that are owned or controlled by a company that
have future economic benefit (we could trade it in for cash, rent it, etc.)
· Examples of assets include: Cash, Accounts Receivables (A/R), Inventory, Land,
Buildings, Equipment, Copyrights, and Investments.
✔✔Historical Cost - ✔✔o Objective
o What if you paid for a similar item 10 years ago? Is it relevant today?
✔✔Market Value - ✔✔o What an asset would sell for today in a normal market
transaction
, o Useful
o Not always a faithful representation of the situation
o Relevant, but not an exact apples to apples comparison
✔✔Sources of funds - ✔✔Liabilities and Equity
✔✔Liabilities - ✔✔Future obligations to pay cash, transfer assets or provide services to
another party
· Examples of liabilities include: Accounts Payable (A/P) [owed money to supplier],
Notes Payable (N/P) [owed money to financial institution (bank)], and Wages Payable.
✔✔Owner's Equity - ✔✔(Shareholders' Equity): The ownership interest in the net assets
of an entity
· Examples of owners' equity include: Capital Stock, Preferred Stock, and Retained
Earnings (RE)
✔✔Three things on a Financial Statement - ✔✔· Company name
· Type of statement (balance sheet)
· Date (i.e. As of 1/13/2026)
✔✔Income Statement - ✔✔Shows how much a company earned (not cash) over a
period of times
· Helps us evaluate past performance
· Useful in predicting a firm's future performance
· Helps us assess the risk or uncertainty of achieving future cash flows
✔✔Revenue - ✔✔Increase in a company's resource from the sale of goods or services
· Examples of revenues include: Sales Revenue and Rent Revenue
· How is this different than an asset?
o Revenue is always a change (increase in an asset or destroy a liability)
o Assets are sitting there and gets changed by the revenue
✔✔Expense - ✔✔Costs incurred in the normal course of business to generate revenues
· Examples of expenses include: Cost of Goods Sold, Utilities Expense, Wages
Expense, and Depreciation Expense
✔✔Expense vs. Liability - ✔✔o Expense is a change (creation of a liability or destruction
of an asset)
o Liabilities are sitting there
✔✔Operating vs. Non-operating Expenses - ✔✔· Operating expenses are the usual and
customary costs that a company incurs to support its main business activities
· Nonoperating expenses relate to the company's financing and investing activities
✔✔Gains/Losses - ✔✔Money made or lost outside of normal firm operations
QUESTIONS SET A+
Required Financial Statements - ✔✔· Balance Sheet
· Income Statement
· Statement of Shareholders' Equity
· Statement of Cash flows
· Statement of Comprehensive Income
✔✔Financial Statement Footnotes - ✔✔o Additional details of figures found in financial
statements
✔✔Independent Auditor Report - ✔✔o Auditor expressing if financial statements are
done appropriately
✔✔Management Discussion and Analysis (MD&A) - ✔✔o Management talking about
what happened in the past period and what they think will happen in the future
o Relevant but not reliable because this letter doesn't require GAAP practices
✔✔Balance Sheet - ✔✔describes the sources and uses of funds of a firm at a point in
time. Useful for:
· Evaluating capital structure
· Assessing risk and future cash flows
✔✔Assets - ✔✔Economic resources that are owned or controlled by a company that
have future economic benefit (we could trade it in for cash, rent it, etc.)
· Examples of assets include: Cash, Accounts Receivables (A/R), Inventory, Land,
Buildings, Equipment, Copyrights, and Investments.
✔✔Historical Cost - ✔✔o Objective
o What if you paid for a similar item 10 years ago? Is it relevant today?
✔✔Market Value - ✔✔o What an asset would sell for today in a normal market
transaction
, o Useful
o Not always a faithful representation of the situation
o Relevant, but not an exact apples to apples comparison
✔✔Sources of funds - ✔✔Liabilities and Equity
✔✔Liabilities - ✔✔Future obligations to pay cash, transfer assets or provide services to
another party
· Examples of liabilities include: Accounts Payable (A/P) [owed money to supplier],
Notes Payable (N/P) [owed money to financial institution (bank)], and Wages Payable.
✔✔Owner's Equity - ✔✔(Shareholders' Equity): The ownership interest in the net assets
of an entity
· Examples of owners' equity include: Capital Stock, Preferred Stock, and Retained
Earnings (RE)
✔✔Three things on a Financial Statement - ✔✔· Company name
· Type of statement (balance sheet)
· Date (i.e. As of 1/13/2026)
✔✔Income Statement - ✔✔Shows how much a company earned (not cash) over a
period of times
· Helps us evaluate past performance
· Useful in predicting a firm's future performance
· Helps us assess the risk or uncertainty of achieving future cash flows
✔✔Revenue - ✔✔Increase in a company's resource from the sale of goods or services
· Examples of revenues include: Sales Revenue and Rent Revenue
· How is this different than an asset?
o Revenue is always a change (increase in an asset or destroy a liability)
o Assets are sitting there and gets changed by the revenue
✔✔Expense - ✔✔Costs incurred in the normal course of business to generate revenues
· Examples of expenses include: Cost of Goods Sold, Utilities Expense, Wages
Expense, and Depreciation Expense
✔✔Expense vs. Liability - ✔✔o Expense is a change (creation of a liability or destruction
of an asset)
o Liabilities are sitting there
✔✔Operating vs. Non-operating Expenses - ✔✔· Operating expenses are the usual and
customary costs that a company incurs to support its main business activities
· Nonoperating expenses relate to the company's financing and investing activities
✔✔Gains/Losses - ✔✔Money made or lost outside of normal firm operations
