UNIT 6 Study Guide

UNIT 6 Study Guide - Revenue and Expenses are CLOSED OUT at...

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UNIT 6 2. Describe the three classifications of businesses (the three ways to generate profit). - Manufacturing - Merchandising - Services 3. List the seven classifications of accounts used in financial accounting, properly distributing them between the three activities involving cash flows. Operating activities •Revenue (Sales) •Expenses •Short-Term Assets •Short-Term Liabilities Investing activities •Long-Term Assets Financial Activities •Long-Term Liabilities •Owner’s Equity UNIT 6B 1. Describe the effect elementary business activities have on the numbers making up the Accounting Equation. 2. Describe the effect of Revenue and Expenses on the Accounting Equation.
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Unformatted text preview: Revenue and Expenses are CLOSED OUT at the end of every period. Revenue and Expenses are closed to RETAINED EARNINGS. 4. Differentiate between the Income Statement and Balance Sheet, and describe the major components of these two financial statements. Income statement-Revenue- expenses = net earnings-Comes from scratch paper used to keep the accounting equation in balance during the period Balance sheet-prepared after closing-assets= liabilities + equity Income statement Company Date ending date of that period Balance sheet As of...
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UNIT 6 Study Guide - Revenue and Expenses are CLOSED OUT at...

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