CFM Financial Statements & Reporting

Question 1

Which financial statement shows a company's revenues and expenses over a specific period?

Accepted Answer

Income Statement

Answer

Balance Sheet

Answer

Cash Flow Statement

Answer

Statement of Stockholders' Equity

Question 2

Under US GAAP, which inventory costing method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

FIFO

Answer

Weighted Average

Answer

Specific Identification

Question 3

What is the accounting equation that forms the foundation of the balance sheet?

Accepted Answer

Assets = Liabilities + Equity

Answer

Revenue − Expenses = Net Income

Answer

Cash + Receivables = Total Assets

Answer

Gross Profit − COGS = Operating Income

Question 4

Which depreciation method results in higher depreciation expense in the early years of an asset's life?

Accepted Answer

Double declining balance

Answer

Straight-line

Answer

Units of production

Answer

Sum-of-years digits only

Question 5

What does the term 'accrual basis accounting' mean?

Accepted Answer

Revenue is recorded when earned and expenses when incurred, regardless of cash flow

Answer

Revenue and expenses are recorded when cash is received or paid

Answer

Only cash transactions are recorded

Answer

Expenses are deferred until the next period

Question 6

Which line item on the income statement represents revenue minus cost of goods sold?

Accepted Answer

Gross profit

Answer

Operating income

Answer

Net income

Answer

EBITDA