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Accounting can be a challenging subject for many students. To help you better understand key concepts and improve your skills, we have compiled a list of common accounting questions and answers below.
Homework Problems and Answers
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Problem: What is the accounting equation?
Answer: The accounting equation is Assets = Liabilities + Equity.
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Problem: What is the difference between accrual accounting and cash accounting?
Answer: Accrual accounting records revenues and expenses when they are incurred, regardless of when cash is exchanged. Cash accounting records revenues and expenses when cash is actually received or paid.
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Problem: What is a journal entry?
Answer: A journal entry is a record of a transaction in the general ledger that shows the accounts affected and the amounts debited and credited.
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Problem: What is depreciation?
Answer: Depreciation is the allocation of the cost of an asset over its useful life.
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Problem: How do you calculate net income?
Answer: Net income is calculated as revenues minus expenses.
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Problem: What is a balance sheet?
Answer: A balance sheet is a financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.
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Problem: What is the purpose of a trial balance?
Answer: The purpose of a trial balance is to ensure that debits equal credits in the general ledger.
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Problem: How do you calculate the debt-to-equity ratio?
Answer: The debt-to-equity ratio is calculated as total debt divided by total equity.
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Problem: What is the difference between a debit and a credit?
Answer: Debits increase assets and expenses and decrease liabilities and equity, while credits do the opposite.
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Problem: What is a cash flow statement?
Answer: A cash flow statement shows a company’s inflows and outflows of cash over a specific period of time.
Conclusion
Accounting is a fundamental aspect of business that involves the recording and reporting of financial transactions. By understanding key concepts such as the accounting equation, accrual accounting, and financial statements, you can better analyze a company’s financial health and make informed decisions. Practice and familiarity with accounting principles are essential for success in the field.
FAQs
1. What are the basic accounting principles?
The basic accounting principles include the going concern concept, the matching principle, the revenue recognition principle, and the materiality principle.
2. How do you calculate retained earnings?
Retained earnings are calculated as beginning retained earnings plus net income minus dividends.
3. What is the difference between a general ledger and a trial balance?
A general ledger is a complete record of a company’s financial transactions, while a trial balance is a list of all the account balances in the general ledger.
4. How do you calculate return on investment (ROI)?
ROI is calculated as net income divided by total assets.
5. What is the purpose of financial statements?
Financial statements provide information about a company’s financial performance and position, which is used by investors, creditors, and other stakeholders to make decisions.
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