MBA 5100 - Ch 2 questions and
answers
Generally Accepted Accounting Principles (GAAP)✔✔a set of accounting standards
that is used in the preparation of financial statements
transaction✔✔A business activity that changes assets, liabilities, or owner's equity
accounting equation✔✔Assets = Liabilities + Stockholder's Equity
income statement✔✔A financial statement showing the revenue and expenses for a
fiscal period.
statement of stockholder's equity✔✔a financial statement that summarizes the
changes in stockholders' equity over an interval of time
balance sheet✔✔A financial statement that reports assets, liabilities, and owner's
equity on a specific date.
statement of cash flows✔✔Financial statement that reports cash receipts and
disbursements related to a firm's three major activities: operations, investments, and
financing.
controls of an accounting system✔✔• Accounting equation must balance
• Ending cash on the statement of cash flows must equal the cash on the balance
sheet
• Net income on the income statement must equal the net effects of revenues
andexpenses on retained earnings
change in retained earnings = net income - dividends✔✔
effects of transactions on stockholder's equity✔✔- Increased by:
- issued common stock
- earned revenues (net income)
- Decreased by:
- paid dividents
- incurred expenses (net income)
common-sized financial statements✔✔Express financial statement amounts as a
percent of a base amount
Common-sized income statement:✔✔Expresses income statement amounts as a
percent of sales
Common-sized balance sheet✔✔Expresses each asset as a percent of total assets
answers
Generally Accepted Accounting Principles (GAAP)✔✔a set of accounting standards
that is used in the preparation of financial statements
transaction✔✔A business activity that changes assets, liabilities, or owner's equity
accounting equation✔✔Assets = Liabilities + Stockholder's Equity
income statement✔✔A financial statement showing the revenue and expenses for a
fiscal period.
statement of stockholder's equity✔✔a financial statement that summarizes the
changes in stockholders' equity over an interval of time
balance sheet✔✔A financial statement that reports assets, liabilities, and owner's
equity on a specific date.
statement of cash flows✔✔Financial statement that reports cash receipts and
disbursements related to a firm's three major activities: operations, investments, and
financing.
controls of an accounting system✔✔• Accounting equation must balance
• Ending cash on the statement of cash flows must equal the cash on the balance
sheet
• Net income on the income statement must equal the net effects of revenues
andexpenses on retained earnings
change in retained earnings = net income - dividends✔✔
effects of transactions on stockholder's equity✔✔- Increased by:
- issued common stock
- earned revenues (net income)
- Decreased by:
- paid dividents
- incurred expenses (net income)
common-sized financial statements✔✔Express financial statement amounts as a
percent of a base amount
Common-sized income statement:✔✔Expresses income statement amounts as a
percent of sales
Common-sized balance sheet✔✔Expresses each asset as a percent of total assets
