$\text{Retained Earnings}_{\text{end}} = \text{Retained Earnings}_{\text{beginning}} + \text{Net Income} - \text{Dividends}$

$\text{Assets} = \text{Liabilities} + \text{Equity}$

Question 1

Which financial statement shows a company's financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 2

Which of the following is classified as an asset on the balance sheet?

Accepted Answer

Land

Question 3

The equation for calculating Retained Earnings at the end of a period is:

Accepted Answer

$	ext{Retained Earnings}_{	ext{end}} = 	ext{Retained Earnings}_{	ext{beginning}} + 	ext{Net Income} - 	ext{Dividends}$

Question 4

Which account would NOT appear on the Statement of Stockholder's Equity?

Accepted Answer

Accounts Receivable

Question 5

A company paid $5,000 cash for equipment. How does this transaction affect the accounting equation?

Accepted Answer

No effect on total assets

Question 6

Which of the following is considered a liability?

Accepted Answer

Notes Payable

Question 7

If a company has total assets of $120,000, total liabilities of $50,000, and equity of $70,000, which equation is satisfied?

Accepted Answer

$	ext{Assets} = 	ext{Liabilities} + 	ext{Equity}$

Question 8

Which statement best describes the purpose of the Statement of Cash Flows?

Accepted Answer

It reports the cash inflows and outflows from operating, investing, and financing activities.

Question 9

Which of the following accounts is classified as equity?

Accepted Answer

Preferred Stock

Question 10

A company earned $10,000 in revenue and incurred $7,000 in expenses during the year. What is the net income?

Accepted Answer

$3,000$

Question 11

Which account would be found on the income statement?

Accepted Answer

Revenue

Question 12

If a company issues common stock for $20,000 cash, what is the effect on the accounting equation?

Accepted Answer

Increase assets and increase equity

Question 13

Which of the following is NOT a major financial statement required by GAAP?

Accepted Answer

Trial Balance

Question 14

A company has the following balances: Cash $15,000, Accounts Receivable $5,000, Equipment $10,000, Accounts Payable $8,000. What is total assets?

Accepted Answer

$30,000$

Question 15

Which account is classified as an expense?

Accepted Answer

Interest Expense

Question 16

If a company pays off $2,000 of its accounts payable, what is the effect on the accounting equation?

Accepted Answer

Decrease assets and decrease liabilities

Question 17

Which of the following best describes 'Revenue'?

Accepted Answer

An increase in assets from selling goods or services

Question 18

Which account would be classified as a liability?

Accepted Answer

Bonds Payable

Question 19

A company has beginning retained earnings of $12,000, net income of $5,000, and dividends of $2,000. What is ending retained earnings?

Accepted Answer

$15,000$

Question 20

Which of the following is NOT classified as an asset?

Accepted Answer

Accounts Payable

Introduction to Financial Statements and Account Classification

Study Guide - Practice Questions