Accounting Exam 1 - Fundamentals of Accounting with answers graded A+ 2023 100% verified

Where are revenues reported? - Income Statement Where are expenses reported? - Income Statement What is the accrual basis of accounting? - Revenues are reported on the income statement when they are earned (often before cash is received) and expenses are reported on the income statement when they occur or expire (often different than when payment is made). What is the benefit of using the accrual basis for accounting? - Provides better picture of company's profits during an accounting period. Revenue will reflect what is actually earned and all expenses incurred to earn that revenue. What principle requires the accrual basis of accounting? - Matching Principle What is another name for the balance sheet? - Financial Position What does the balance sheet represent? - Company's financial position at the end of a specified time. It is a snapshot of the company's financial position at a moment in time. (IE: If the accounts reported on a balance sheet are dated December 31, 2015 - this reflects instant when all transactions THROUGH December 31st have been recorded) What does a balance sheet show? - Shows what a company owns as well as what it owes as of the date indicated. What is an asset? - Things that the company owns. They are resources of the company acquired through transactions and have future economic value. Assets include costs paid in advance that have not yet expired (prepaid advertising, prepaid legal fees, prepaid rent, etc.). Give 4 examples of assets described on a balance sheet. - Cash Temporary Investments Inventory Accounts Receivable Supplies Prepaid Insurance Land Animals Machines Land Improvements Buildings Equipment Goodwill etc. On which financial statement do assets appear? - Balance sheet What is an expense? - Costs associated with running the business (goods and services). Expenses decrease owner's equity. Give 4 examples of liabilities. - Payment to creditors Loan from bank Investment Accounts payable Accrued expenses Long-term debt On which financial statement do liabilities appear? - Balance sheet What are other names for the income statement? - Profit & Loss Statement (P&L), statement of operations, statement of income What does an income statement show? - Profitability of a company during the time interval specified. Ultimately, the statement shows a net profit / income or net loss.