NAME: Svientek Cody

Chapter 1

Save this document as LastNameFirstNameCh1TI (e.g. MitchellLieselCh1TI). Type in your name at the
top of the page. Answer the following questions based on reading the textbook. Submit your
completed ticket-in as an attachment to the assignment on ReggieNet by 8am on Mon., Aug 29. Bring
a copy of your answers to class.

Make a note of any items you find confusing or have questions on. You will post this in the Ch 1
Discussion Forum in ReggieNet by 8am on Mon., Aug 29.

1. Define accounting and financial accounting. Identify some of the questions that can be
addressed with financial accounting information.

Accounting The process of identifying, measuring, recording, and communicating financial

information about a company’s activities so decision makers can make informed decisions.

Financial accounting Accounting and reporting to satisfy the outside demand (primarily investors and
creditors) for accounting information.

2. Write out the fundamental accounting equation and the expanded accounting equation (Ch 2,
pages 66-67). Define each component.

Assets = Liabilities + Shareholder Equity.

Assets= Liabilities + Contributed Capital + Beginning Retained Earnings + Revenues – Expenses –

Dividends

Assets- property owned by a person or company, regarded as having value and

available to meet debts, commitments, or legacies. Such as cash, property,
Intellectual Property, people.
Liabilities- Money owed; debts or obligations

Contributed Captial- an entry on the shareholders' equity section of a company's

balance sheet that summarizes the total value of stock that shareholders have
directly purchased from the issuing company.
Beginning Retained Earnings - refer to the percentage of net earnings not paid out as
dividends, but retained by the company to be reinvested in its core business, or to
pay debt
Revenues – Income, or money or goods coming into possession of the company.

Expenses - Costs of goods or services, or losses.

Dividends- A sum of money paid timely to its investors in a company.

3. Identify the 4 basic financial statements. For each statement, identify the heading, the main
components and the relationships among components. Also discuss the relationship among the
financial statements.

1. Income Statement : Header, title of the company, name of the statement, a specific
period (usually as is of a date), money scaling, revenues listed, total revenues, expenses
listed, total expenses, and the net income. This income statement is giving the net
income for the retained earnings sheet.

2. Retained Earnings: Header, title of company, name of statement, time period cover, listed
retained earnings balance at the beginning of the period obtained from the balance
sheet, add the net income from the income statement, subtract the dividends and
double underline the total. This is related to the balance sheet to figure out how much
money is divided for the investors as well as giving the listed retained earnings at the end
of the year balance sheet.

3. Cash flows: Figure out which cash flow chart you deem appropriate to list, give the
header, the title of the company, the name of the statement, the time period covered,
list the net cash provided from operating activities, subtracted by the listed investing
activities, and add the financing activities. Take the total and double underline the net
change in cash, and then take the balance sheet asset from the beginning of the year,
and compare it to the end of the year. This takes a comparison of the cash of the assets
of the balance sheets and compares it to figure out how the money is flowing.

4. Balance sheet: header, title of the company, the end/beginning of the year period, listed
assets ( cash, land, etc.), total assets. List all liabilities, all shareholders equities (common
stock listed, retained earnings listed) and add up the liabilities and stockholders equities
to get the total asset. This is the biggest sheet needed for reference since its used for
financial prediction, investments, listed assets and what needs to be payed, it gives the
retained earnings for the retained earnings list, and cash for cash flow.

4. Identify and define the 4 categories of assets on a classified balance sheet (ignore the 5 th
category of “Other Non-Current Assets”). Provide examples of some of the specific account
titles included in each category.

Current assets, consist of cash and other assets that are reasonably expected to be converted
into cash within or one operating cycle, whichever is longer. Short term investments, cash, accounts
receivable, inventory, any short term payments received.

Noncurrent assets- any assets that you cannot get within 1 year or within one operating cycle.
Which this includes
 Long term investments, which are just investments that take over a year or one cycle. This can
include land or buildings that a company is not currently using.

Plant, Property, and Equipment. These are assets used for production of goods for sale in a much
more immediate rate. This includes furniture, inventory, factories, farms, buildings, etc.

Non-tangiable assets – Similar to plants, property, and equipment but in that it is not physical. These
include patents, copyrights, trademarks, and goodwills.

5. Identify and define the 2 categories of liabilities on a classified balance sheet. Provide examples
of some of the specific account titles included in each category.

Current Liabilities- Payments or services that must be conducted within the period of one year or
one operating cycle. These include accounts payable, salaries payable, unearned revenue, interest
payable, and income taxes payable.

Long-Term Liabilities – payments or services that is conducted in the period of more than one year or
one operating cycle. These include notes payable or bonds payable.

6. Identify the two main categories in the stockholders’ equity section.

Contributed capital—the owners’ investing of cash and other assets to the company which often falls
under common stock.

Retained Earnings- accumulated net income of a company that has not been given out as a dividend.

7. For a multiple-step income statement: Identify the main sections (see Exhibit 1.9). Define gross
margin, income from operations, and net income. List the non-operating activities found in
Other Revenues and Gains and Other Expenses and Losses sections (see Exhibit 1.10).

The income statement sheet includes a name of the company, a header for listing what the sheet is and
what it pertains to, a date for record keeping and assisting with keeping track of other sheets, and

revenues- which are sales, or increases in assets from anything by investments or payments due to the
company.

Expenses- the cost of resources used to earn revenue during a period. This is often listed with costs of
goods sold, selling, buying and administrative expenses, taxes, and research and development.

Gross margin – the difference between net sales and costs of goods sold.

Income from operations – the difference between gross margin and operating expenses.

Net Income – the difference between income from operations and any non operating revenues and
expenses.

Other non operating gains

 Other revenues and gains, interest income on investments, dividend income from stock, rent
revenue, gains on disposal or selling of properties.

Other expenses and loss, interest expenses from loans, losses from disposal of plant property
and equipment, losses from accidents and vandalism, employee strikes, income tax.