accounting questions

accounting questions - 4. The Federal Reserve System is a...

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1. A balance sheet weighs a business’s assets, both long and short term, against the company’s liabilities and stockholders’ equity. To form a properly balanced balance sheet, assets must equal these liabilities plus the equity. An income statement, on the other hand, is a way of converting the net sales into net income. This is done by first subtracting out the cost of goods sold to get the gross margin. Next, operating expenses are removed to arrive at the gross income before taxes. Finally, taxes are subtracted out to arrive at the net income. 2. The six sources of funding for businesses are grants, loans, bonds, stocks, transactions, and asset liquidations. 3. Management account helps to provide decision makers with information about financing, investing, and operating activities. These help to assist the managers in making future decisions on the basis of past events. Financial accounting is of value to external decision makers and helps them to evaluate how well the business has achieved its goals.
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Unformatted text preview: 4. The Federal Reserve System is a governmental bank established by the Federal Reserve Act of 1913 that deals in the transaction of Federal Reserve Notes to provide the nation with a liquid currency. 5. A bond is a typically long-term asset that represents funds that a corporation borrows from public investors, or that are issued by the governments to raise money. Bonds are held for a specific, pre-determined length of time until repayment with a periodic payment of interest. Stocks, on the other hand, represent a small ownership of a corporation, are issued by the owner, and have no such obligation of length of possession and thus can be freely transferred between owners. 6. FIFO, or first-in, first-out valuation systems calculate the sale of goods by transferring the value of assets from inventory to cash based on the value of the first-purchased inventory. LIFO, or last-in, last-out, utilizes the most recently added inventory when transferring asset....
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accounting questions - 4. The Federal Reserve System is a...

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