Accounting Principles and Financial Statements Flashcards
6 cards from real CB practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Accounting Principles and Financial Statements flashcards as text
What is the fundamental accounting equation?
Answer: Assets = Liabilities + Owner’s Equity
The basic accounting equation represents the relationship between assets, liabilities, and owner's equity.
Which financial statement provides a snapshot of a company's financial position at a specific point in time?
Answer: Balance Sheet
The balance sheet reports a company's assets, liabilities, and equity at a specific date, providing a snapshot of financial health.
What does an income statement show?
Answer: A report on the company's net income or loss
The income statement summarizes a company's revenues and expenses over a period of time, showing net profit or loss.
What is the purpose of double-entry accounting?
Answer: To maintain accurate financial records by recording transactions in at least two accounts
Double-entry accounting ensures that every financial transaction affects at least two accounts, maintaining balance in the accounting equation.
What is the purpose of adjusting entries?
Answer: To align financial records with the accrual basis of accounting
Adjusting entries are used to record revenues and expenses in the correct accounting period, following the accrual basis of accounting.
Which financial statement explains changes in cash flow from operating, investing, and financing activities?
Answer: Statement of Cash Flows
The statement of cash flows categorizes cash inflows and outflows into operating, investing, and financing activities.