MGT 6201 Accounting Test EXAM |
PRACTICE QUESTIONS AND
ANSWERS | COMPLETE STUDY
GUIDE AND EXAM PREP
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 o Management talking about what happened in the
(MD&A) 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
PRACTICE QUESTIONS AND
ANSWERS | COMPLETE STUDY
GUIDE AND EXAM PREP
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 o Management talking about what happened in the
(MD&A) 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
