Accounting: Concepts and the Cycle
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What are some of the items that appear on a company's balance sheet? How does a company calculate net income? Which statements could be useful in explaining how much cash a company has used or generated during an accounting period, and why?
What are the steps of the accounting cycle? Why is it necessary to make adjusting entries at the end of each accounting period? What would happen if all of the steps of the accounting cycle were not completed in a specific accounting period?
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The 479-word solution addresses each question with several sentences to explain the concepts. Examples are included, as appropriate. The question about the accounting cycle is referenced to two excellent sources. This solution is a good generalized source of information about the concepts of accounting.
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What are some of the items that appear on a company's balance sheet? Assets owned (cash, inventory, equipment), liabilities owed (accounts payable, credit lines, long term debt), and equity (residual value composed of stock and retained earnings). The formula is A-L= E
How does a company calculate net income? Net income is the difference between revenue and expense. For most companies, revenue is reported when it is earned, whether received or not. Expenses are reported when incurred, whether paid or not. Formula is R-E=NI
Which statements could be useful in explaining how much cash a company has used or generated during an accounting period, and why? The Statement of cash flows is very informative because it ...
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