Wall /
Street
/ /
Prep
/ /
Red
/ /
Book
/ /
Accounting Questions With Correct Answers
/ // // // //
What //is //the //primary //purpose //of //US //GAAP? //- //verified //answer(s)-
✔✔SEC /
/authorizes /
/the /
/FASB /
/to /
/determine /
/the /
/accounting /
/rules. //Under //FASB, //financial //statements //are //required //to //be //prepared //in //accordance //with
//US //GAAP.
What //are //the //main //sections //of //a //10-K? //- //verified //answer(s)-✔✔In //a //10-
K, /
/you'll /
/find /
/the /
/three /
/core /
/financial /
/statements, //which //are //the //income //statement, //cash //flow //statement, //and //balance //sheet. //
,There'll /
/also /
/be //
a/
/statement /
/of //shareholders' //equity, //a //statement //of //comprehensive //income, //and //supplementary //data
//and //disclosures //to //accompany //the //financials.
What //is //the //difference //between //the //10-K //and //10-Q? //- //verified //answer(s)-✔✔10-K //-
> //Annual //report
10-Q //-> //Quarterly
Additional //Differences: //
10-Ks //need //an //independent //auditor. //
10-Qs //are //only //reviewed //by //CPAs. //
10-Ks //within //60-90 //days //after //the //fiscal //year //ends. //
10-Qs //within //40-45 //days //after //quarter //ends
Walk //me //through //the //three //financial //statements. //- //verified //answer(s)-
✔✔1. //Income //Statement //("IS"): //
The /
/income /
/statement /
/shows //
a/
/company's /
/profitability /
/over //
a/
/specified /
/period. /
/The /
/beginning /
/line /
,/item /
/is /
/revenue, /
/and //upon //deducting //various //costs //and //expenses, //the //ending //line //item //is //net //income.
// 2. //Balance //Sheet //("BS"): //
The /
/balance /
/sheet //is //a //snapshot //of //a //company's //resources //(assets) //and //sources //of //funding //(liabilities
//and //shareholders' //equity) //at //a //specific //point //in //time.
3. //Cash //Flow //Statement //("CFS"): //
Under //the //indirect //approach, //first //is //net //income, //which //will //be //adjusted //for //non-
cash /
/items /
/and /
/changes /
/in /
/working /
/capital /
/to /
/arrive //at //CFO. //CFI //and //CFF //are //then //added //to //CFO //to //arrive //at //the //net //change //in //cash,
//which //represents //the //actual //cash //inflows/(outflows) //in //a //given //period.
Walk //me //through //the //income //statement //- //verified //answer(s)-✔✔
Walk //me //through //the //balance //sheet //- //verified //answer(s)-✔✔
Could /
/you /
/give /
/further /
, /context //on //what //assets, //liabilities, //and //equity //each //represent? //- //verified //answer(s)-
✔✔Assets: //Resources //that //can //be //sold //for //money //or //creative //positive //monetary //benefit.
//Future //inflows.
Liabilities: //Unsettled //obligations //to //another //party //in //the //future. //Future //outflows.
Equity: /
/Capital /
/invested /
/in /
/the /
/business /
/and /
/represents //the //internal //sources //of //capital //that //helped //fund //the //assets. //RE //is //here //too.
What /
/are //the //typical //line //items //you //might //find //on //a //balance //sheet? //- //verified //answer(s)-✔✔
Walk //me //through //the //cash //flow //statement? //- //verified //answer(s)-
✔✔There //are //two //methods: //Direct //and //Indirect. //
Indirect:
1. //CFO: //Starts //with //net //income //and //adds //back //non-
cash /
/expenses /
/such /
/as /
/depreciation //
&/
/amortization /
/and /
Street
/ /
Prep
/ /
Red
/ /
Book
/ /
Accounting Questions With Correct Answers
/ // // // //
What //is //the //primary //purpose //of //US //GAAP? //- //verified //answer(s)-
✔✔SEC /
/authorizes /
/the /
/FASB /
/to /
/determine /
/the /
/accounting /
/rules. //Under //FASB, //financial //statements //are //required //to //be //prepared //in //accordance //with
//US //GAAP.
What //are //the //main //sections //of //a //10-K? //- //verified //answer(s)-✔✔In //a //10-
K, /
/you'll /
/find /
/the /
/three /
/core /
/financial /
/statements, //which //are //the //income //statement, //cash //flow //statement, //and //balance //sheet. //
,There'll /
/also /
/be //
a/
/statement /
/of //shareholders' //equity, //a //statement //of //comprehensive //income, //and //supplementary //data
//and //disclosures //to //accompany //the //financials.
What //is //the //difference //between //the //10-K //and //10-Q? //- //verified //answer(s)-✔✔10-K //-
> //Annual //report
10-Q //-> //Quarterly
Additional //Differences: //
10-Ks //need //an //independent //auditor. //
10-Qs //are //only //reviewed //by //CPAs. //
10-Ks //within //60-90 //days //after //the //fiscal //year //ends. //
10-Qs //within //40-45 //days //after //quarter //ends
Walk //me //through //the //three //financial //statements. //- //verified //answer(s)-
✔✔1. //Income //Statement //("IS"): //
The /
/income /
/statement /
/shows //
a/
/company's /
/profitability /
/over //
a/
/specified /
/period. /
/The /
/beginning /
/line /
,/item /
/is /
/revenue, /
/and //upon //deducting //various //costs //and //expenses, //the //ending //line //item //is //net //income.
// 2. //Balance //Sheet //("BS"): //
The /
/balance /
/sheet //is //a //snapshot //of //a //company's //resources //(assets) //and //sources //of //funding //(liabilities
//and //shareholders' //equity) //at //a //specific //point //in //time.
3. //Cash //Flow //Statement //("CFS"): //
Under //the //indirect //approach, //first //is //net //income, //which //will //be //adjusted //for //non-
cash /
/items /
/and /
/changes /
/in /
/working /
/capital /
/to /
/arrive //at //CFO. //CFI //and //CFF //are //then //added //to //CFO //to //arrive //at //the //net //change //in //cash,
//which //represents //the //actual //cash //inflows/(outflows) //in //a //given //period.
Walk //me //through //the //income //statement //- //verified //answer(s)-✔✔
Walk //me //through //the //balance //sheet //- //verified //answer(s)-✔✔
Could /
/you /
/give /
/further /
, /context //on //what //assets, //liabilities, //and //equity //each //represent? //- //verified //answer(s)-
✔✔Assets: //Resources //that //can //be //sold //for //money //or //creative //positive //monetary //benefit.
//Future //inflows.
Liabilities: //Unsettled //obligations //to //another //party //in //the //future. //Future //outflows.
Equity: /
/Capital /
/invested /
/in /
/the /
/business /
/and /
/represents //the //internal //sources //of //capital //that //helped //fund //the //assets. //RE //is //here //too.
What /
/are //the //typical //line //items //you //might //find //on //a //balance //sheet? //- //verified //answer(s)-✔✔
Walk //me //through //the //cash //flow //statement? //- //verified //answer(s)-
✔✔There //are //two //methods: //Direct //and //Indirect. //
Indirect:
1. //CFO: //Starts //with //net //income //and //adds //back //non-
cash /
/expenses /
/such /
/as /
/depreciation //
&/
/amortization /
/and /
