The Financial Statements quiz #2 Flashcards
The Financial Statements quiz #2
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What is the main difference between assets and liabilities?
Assets are resources owned by the company, while liabilities are obligations owed to others. What is the role of additional paid-in capital in equity?
Additional paid-in capital represents the amount paid by investors above the par value of stock. What is the meaning of 'fees earned' in accounting?
'Fees earned' is a revenue account representing income from services provided. What is the impact of dividends on stockholders' equity?
Dividends decrease stockholders' equity by reducing retained earnings. What is the difference between service revenue and sales revenue?
Service revenue is earned from providing services, while sales revenue is earned from selling goods. What is the significance of the word 'expense' in an account title?
It indicates that the account is an expense and should be reported on the income statement. What is the purpose of the income statement's 'bottom line'?
The 'bottom line' shows the net income, which is the company's profit or loss for the period. How do investments differ from common stock in account classification?
Investments are assets representing ownership in other companies, while common stock is an equity account representing ownership in the reporting company. What is the role of the balance sheet in financial reporting?
The balance sheet provides information about a company's financial position at a specific date. What is the main purpose of financial statements?
Financial statements provide information about a company's financial performance and position to external users. What is the meaning of 'long-term investments' as an asset?
Long-term investments are assets that a company intends to hold for more than one year. What is the difference between accrued expenses and prepaid expenses?
Accrued expenses are liabilities for expenses incurred but not yet paid, while prepaid expenses are assets for payments made in advance. What is the significance of the income statement for external users?
It helps external users assess a company's profitability and operating performance. What is the significance of the statement of cash flows for external users?
It helps external users evaluate a company's liquidity and cash management. What is the significance of the balance sheet for external users?
It helps external users assess a company's financial position and solvency. What is the significance of the statement of stockholders' equity for external users?
It helps external users understand changes in ownership interest and the distribution of profits. What is the role of the income statement in the preparation of other financial statements?
The net income from the income statement is used in the statement of stockholders' equity and affects the balance sheet. What is the role of the statement of stockholders' equity in the preparation of the balance sheet?
The ending equity balance from the statement of stockholders' equity is reported in the equity section of the balance sheet. What is the role of the balance sheet in the preparation of the statement of cash flows?
The balance sheet provides beginning and ending balances for cash and other accounts used to prepare the statement of cash flows. What is the meaning of 'merchandise inventory' as an asset?
Merchandise inventory is goods held for resale and is classified as an asset. What is the meaning of 'buildings' as an asset account?
'Buildings' represents the value of structures owned by the company and is classified as an asset. What is the meaning of 'equipment' as an asset account?
'Equipment' represents machinery and tools owned by the company and is classified as an asset. What is the meaning of 'patents' as an asset account?
'Patents' represent exclusive rights to produce or sell inventions and are classified as intangible assets. What is the meaning of 'accounts receivable'?
'Accounts receivable' is an asset representing amounts owed to the company by customers. What is the meaning of 'notes receivable'?
'Notes receivable' is an asset representing written promises from others to pay a specific amount in the future. What is the meaning of 'accounts payable'?
'Accounts payable' is a liability representing amounts the company owes to suppliers. What is the meaning of 'notes payable'?
'Notes payable' is a liability representing written promises to pay a specific amount in the future. What is the meaning of 'bonds payable'?
'Bonds payable' is a liability representing amounts owed to bondholders. What is the meaning of 'accrued expenses'?
'Accrued expenses' are liabilities for expenses that have been incurred but not yet paid. What is the meaning of 'income taxes payable'?
'Income taxes payable' is a liability representing taxes owed to the government. What is the meaning of 'current portion of long-term debt'?
It is the part of long-term debt that is due within the next year and is classified as a current liability. What is the meaning of 'common stock'?
'Common stock' is an equity account representing ownership shares issued to investors. What is the meaning of 'preferred stock'?
'Preferred stock' is an equity account representing shares with preferential rights over common stock. What is the meaning of 'additional paid-in capital'?
'Additional paid-in capital' is the amount paid by investors above the par value of stock. What is the meaning of 'retained earnings'?
'Retained earnings' is the accumulated net income not distributed as dividends. What is the meaning of 'treasury stock'?
'Treasury stock' is a company's own stock that it has repurchased and holds in its treasury. What is the meaning of 'sales revenue'?
'Sales revenue' is income earned from selling goods. What is the meaning of 'service revenue'?
'Service revenue' is income earned from providing services. What is the meaning of 'investment revenue'?
'Investment revenue' is income earned from investments. What is the meaning of 'payroll expense'?
'Payroll expense' is the cost of employee wages and salaries.
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