Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

The Financial Statements

Financial Accounting

1. Introduction to Accounting

The Financial Statements

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Multiple Choice

Why should the income statement be prepared before the other financial statements?

Because the income statement determines the ending balance of cash for the period.

Because the income statement provides information about cash flows used in the statement of cash flows.

Because the net income or loss calculated on the income statement is needed to prepare the statement of retained earnings.

Because the income statement lists all assets and liabilities required for the balance sheet.

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Verified step by step guidance

Understand the purpose of the income statement: The income statement summarizes a company's revenues and expenses over a specific period, resulting in net income or net loss. This figure is crucial for subsequent financial statements.

Recognize the relationship between the income statement and the statement of retained earnings: The net income or loss calculated on the income statement is used to update the retained earnings balance in the statement of retained earnings.

Note that the statement of retained earnings is prepared after the income statement: The retained earnings balance is adjusted by adding net income (or subtracting net loss) and accounting for dividends paid during the period.

Understand the sequence of financial statement preparation: The income statement is prepared first, followed by the statement of retained earnings, which then feeds into the balance sheet. The balance sheet uses the updated retained earnings figure as part of the equity section.

Clarify why other options are incorrect: The income statement does not directly determine the ending cash balance (this is done in the statement of cash flows), nor does it list assets and liabilities (this is the role of the balance sheet).