1. What are financial statements?

Reports with a defined format containing accounting information. They include the balance
sheet, income statement, statement of stockholders’ equity, and statements of cash flows.

2. What are the four basic financial statements?

Statement of owner’s equity
Balance sheet
Heading
Statement of cash flows

3. What significant items related to the statement are found in the heading?
Climbs name
Income statement
Date
Names of accounts
Balance of account
4. What is the balance sheet?
A list of the assets, liabilities, and equity of an entity at a point in time, usually the end of a
month, quarter, or year.
5. What is another name for the balance sheet?
" Statement of Financial Position"
6. What elements are considered in the balance sheet?
assets, liabilities and owners' equity
7. What is the income statement?
An income statement is a financial statement that reports a company's financial
performance over a specific accounting period.
8. What is another name for the income statement?
Profit and loss account
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15. steps in writing financial statements?

-Building a balance sheet

-Writing the income statement
-Writing the statement of cash flows
16. Write the events about how to review a financial statement of any business
There are five steps you have to follow in order to better understand your review of the
financial statement of any business. First, use the balance sheet to review the financial
condition of a business, as of a given period, by looking at how it manages its asset,
liabilities and equity.
Then, review the income statement report to understand the overall performance, profit
or loss, of a business in a given period.
Basically, it comprises of the following: revenue, expenses, profit (loss) before tax, income
tax and profit (loss) after tax. Now, use the cash flow statement to understand the
movement of cash in a given period.
Remember that there are two types of cash flow statement: an indirect method and direct
method. Once you have checked the cash flow statement, it’s time to check the statement
of owner’s equity to get the details of the movement of the equity account discussed in
the balance sheet above. Finally, look at he notes to the financial statement to read the
narrative explanation of the whole financial statement.
17. Write about how to prepare an income statement
The first thing you have to do when preparing the income statement is to write a proper
heading. The heading requires 3 pieces of information: the company’s name, the words
“Income Statement,” and the period that the income statement covers (for example, “For
the year ended March 30, 2013”)
Once you have written the heading, you have to record the account names on the income
statement. The income statement needs the following accounts, in descending order:
sales cost of sales, operating expenses, and other expenses or revenues. These accounts
can be broken down in more detail as well. Then, record the balance of each account. You
record the balance by filling in the account balance over the period that the income
statement reflects to the right of each account name.
Finally, once all the expenses and revenues have been summed, the final figure will be
recorded as net income.
18. Write about how to prepare the statement of cash flows
First, prepare the proper heading for the retained earnings statements. Then, record the
account names of the retained earnings statements. Now, record the balance of each
account. Finally, by adding net income and subtracting dividends paid from the operating
balance of retained earnings, you will arrive at the new balance for retained earnings.
19. What steps do you have to consider when recording the account names on the
income statement?
20. What steps do you have to consider when recording the account names on the
retained earnings statement?
21. Write about how to prepare the retained earnings retained
22. What are adjusting entries?
Adjusting entries are accounting journal entries that convert a company's accounting
records to the accrual basis of accounting. An adjusting journal entry is typically made just
prior to issuing a company's financial statements.
23. What are closing entries?
Closing entries, also called closing journal entries, are entries made at the end of an
accounting period to zero out all temporary accounts and transfer their balances to
permanent accounts. In other words, the temporary accounts are closed or reset at the
end of the year. This is commonly referred to as closing the books.
24. Which temporary accounts are closed?
Temporary accounts include all of the income statement accounts (revenues, expenses,
gains, losses), the sole proprietor's drawing account, the income summary account, and
any other account that is used for keeping a tally of the current year amounts.
25. Which accounts are not closed?
Real or permanent accounts:
-cash
-accounts receivable
- allowance for doubtful accounts
-inventory
-prepaid insurance
-accounts payable
-accrual liabilities
-owners equity
26. What happens with the balance of permanent accounts?
27. What are prepaid expenses, accrued expenses, unearned revenues, accrued
revenues?