January ACC 201 Connect Questions

what does FASB stand for and what does it do?

Financial Accounting Standard Board -they establish the standards for accounting IN the United States (not all countries follow the same standards) creates USA GAAP

Which of the following regarding retained earnings is false?

Retained earnings is an asset on the balance sheet.

Assets

Assets are the probable (expected) future economic benefits owned by the entity as a result of past transactions. They are the resources owned by the business at a given point in time such as cash, receivables, inventory, machinery, buildings, land, and patents.

Explain the equation for the balance sheet.

Assets= Liabilities+ Stockholder's Equity

Which of the following regarding GAAP is true?

Changes in GAAP can affect the interests of managers and stockholders.

Liabilities

Liabilities are probable (expected) debts or obligations of the entity as a result of past transactions which will be paid with assets or services in the future. They are the obligations of the entity such as accounts payable, notes payable, and bonds payable.

Stockholders' Equity

Stockholders' equity is financing provided by owners of the business and operations. It is the claim of the owners to the assets of the business after the creditor claims have been satisfied. It may be thought of as the residual interest because it represents assets minus liabilities.

Explain the equation for the income statement. What are the three major items reported on the income statement?

The equation for the income statement is Revenues - Expenses = Net Income (or Net Loss if the amount is negative). Thus, the three major items reported on the income statement are (1) revenues, (2) expenses, and (3) net income.

Explain why the income statement and the statement of cash flows are dated "For the Year Ended December 31," whereas the balance sheet is dated "At December 31."

The income statement and the statement of cash flows are dated "For the Year Ended December 31," because they report the inflows and outflows of resources during a period of time. In contrast, the balance sheet is dated "At December 31," because it represents the resources, obligations and stockholders' equity at a specific date.

Which of the following is true regarding the income statement?

The income statement is sometimes called the statement of operations.

What is the purpose of a balance sheet

The purpose of the balance sheet is to report the financial position of an entity at a given date, that is, to report information about the assets, obligations and stockholders' equity of the entity as of a specific date.

What is the purpose of an income statement

The purpose of the income statement is to present information about the revenues, expenses, and the net income of the entity for a specified period of time.

What is the purpose of a statement of cash flows

The purpose of the statement of cash flows is to present information about the flow of cash into the entity (sources), the flow of cash out of the entity (uses), and the net increase or decrease in cash during the period.

What is the purpose of a statement on stockholder's equity?

The statement of stockholders' equity reports the changes in each of the company's stockholders' equity accounts during the accounting period including issue and repurchase of stock and the way that net income and distribution of dividends affected the retained earnings of the company during that period.

Which of the following is false regarding the balance sheet?

the balance sheet reports the changes in specific account balances over a period of time.

As stated in the audit report, or Report of Independent Accountants, the primary responsibility for a company's financial statements lies with

the company's management