1. Define the process of accounting.
Accounting is the process of identifying, measuring and communicating economic information about an organization for the purpose of making decisions and informed judgments.
2. What are the three major divisions in the accounting field? Financial, managerial and cost accounting
3. What is the Fundamental Accounting Equation?
Assets = Liabilities + Equity
4. What is the purpose of a balance sheet? What are some examples of typical balance sheet accounts? A balance sheet is a summary of financial balances of an organizations assets, liabilities and equity listed on a specific date such as the end of year report. A balance sheet is a snap shot of the company’s financial status
5. What is the purpose of an income statement? What are some examples of typical income statement accounts? An income statement is also known as profit and loss statement is one of the financial statements of a company and shows revenues and expenses during a particular period. An income statement indicates how the revenues are transformed into net income
6. What is the purpose of a statement of cash flows? What are some examples of typical statement of cash flow accounts? A cash flow statement consists of three parts; operating, investing and financing. It is the summary of transactions that affected cash in a particular period. In other words, it si a summary of all the cash payments and the cash receipts that occurred during a month, quarter or year for a business.
7. Based on the financial information below, prepare an income statement and a balance sheet for Joe’s-Fly-by-Night Oil company for the year ended December 31, 2012. Unless otherwise indicated, assume all information below is either for the year 2012 or as of December 31, 2012.