Iv financial statements 2 acct201 final study guide a

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Accounting
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Chapter 6 / Exercise EX6-33
Accounting
Reeve/Warren
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IV. Financial Statements 2
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Accounting
The document you are viewing contains questions related to this textbook.
Chapter 6 / Exercise EX6-33
Accounting
Reeve/Warren
Expert Verified
ACCT201 Final Study Guide A Income Statement Reports on operating activities by listing amounts for sales, costs, and expenses over a period of time ; net income is computed as sales less all costs and expenses. B. Statement of Retained Earnings Reports changes in retained earnings of the business over a period of time. Changes result from net income (or loss) and dividends. C. Balance Sheet Reports on investing and financing by listing amounts for assets, liabilities, and equity at a point in time . D. Statement of Cash Flows Reports on cash flows for operating, investing, and financing activities over a period of time. V. Decision Analysis—Return on Assets (ROA) A. Return on assets, also called return on investment (ROI), is a profitability measure; useful in evaluating management, analyzing and forecasting profits, and planning activities. B. It is calculated by dividing net income by average total assets. Chapter 2 I. Analyzing and Recording Process A. Accounting process identifies business transactions and events, analyzes and records their effects, and summarizes and presents information in reports and financial statements. Steps in accounts process that focus on analyzing and recording transactions and events are: (1) record relevant transactions and events in a journal, (2) post journal information to ledger accounts, and (3) prepare and analyze the trial balance. Accounting records are informally referred as the accounting books , or simply the books. B. Source documents identify and describe transactions and events. Source documents are sources of accounting information (hard copy or electronic form). Examples are sales tickets, checks, purchase orders, bills from suppliers, employee earnings records, and bank statements. Source documents provide objective and reliable evidence about transactions and events. C. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. The general ledger , or ledger , is a record containing all accounts used by a company. D. Accounts are arranged in three basic categories based on the accounting equation. A separate accounts is kept for each of the following: 1. Asset Accounts —resources owned or controlled by a company that have expected future benefits; examples include Cash, Accounts Receivable, Note Receivable, Prepaid Accounts, Supplies, Equipment, Buildings, and Land. 3
ACCT201 Final Study Guide 2. Liability Accounts —claims by creditors against assets; obligations to transfer assets or provide products or service to other entities; examples include Accounts Payable, Note Payable, Unearned Revenue, and Accrued Liabilities. 3. Equity Accounts —owner’s residual interest in the assets of the business after deducting liabilities; examples include Common Stock, Dividends, Revenues and Expenses.

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