Financial Accounting

Study Guide Exercise Answers (Chapter 1&2)

Accounting: Information for Decision Making & Basic Financial Statement

TRUE-FALSE QUESTIONS

1. False - Management accounting is to assist management in operating the business.
2. True 
3. False - They are different financial statements.
4. False - It is not one of the primary financial statements. 
5. True  
6. False - A profit results from having more revenues than expenses. 
7. False - Total assets always equal total liabilities plus total equity. 
8. True  

FILL IN THE BLANKS

1. The primary financial statements for external financial reporting are (i) Income Statement, (ii) Statement of Financial Position and (iii) Statement of Cash Flows.
2. The statement of cash flows provides information about how a company receives its cash and where it spends its cash during a period of time. 
3. Financial Accounting provides information about the financial resources, obligations and activities of an enterprise that is intended for use primarily by investors and creditors.
4. The competent accountants have to prepare and present the accounting information properly by using their professional judgment and applying strong ethical standards.  
5. The professional accountants have to consider whether there is adequate disclosure to provide facts necessary for the proper interpretation of the statements.
6. A company has assets total $450,000, liabilities total $120,000, and share capital totals $200,000, the amount of retained earnings is $130,000.
7. A company purchased tools by cash, Tools will increase and Cash will decrease.
8. A company purchased office supplies on credit, Office Supplies and Accounts Payable will increase.
9. A company purchased office equipment by issuing a short-term note payable, Office equipment and Notes Payable will increase.
10. A company sold 10,000 shares of its common stock for a total of $45,000 cash, Cash and Share Capital will increase.

MATCHING

SHORT QUESTION