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Homework Problems and Answers
1. What is the basic accounting equation?
The basic accounting equation is Assets = Liabilities + Equity.
2. How do you calculate net income?
Net income is calculated by subtracting expenses from revenues.
3. What is a balance sheet?
A balance sheet is a financial statement that shows a company’s assets, liabilities, and equity at a specific point in time.
4. How do you calculate depreciation?
Depreciation is calculated by dividing the initial cost of an asset by its useful life.
5. What is the purpose of the income statement?
The income statement shows a company’s revenues and expenses over a specific period of time, typically a year.
6. What is the difference between cash flow and net income?
Cash flow is the amount of cash coming in and going out of a company, while net income is the total profit after all expenses have been deducted.
7. Why is the accounting equation important?
The accounting equation is important because it ensures that a company’s financial records are accurate and balanced.
8. How do you calculate return on investment (ROI)?
ROI is calculated by dividing the net profit by the initial investment and expressing it as a percentage.
9. What is a journal entry?
A journal entry is a record of a transaction in a company’s accounting system, showing the debits and credits for each account affected.
10. How do you prepare a trial balance?
A trial balance is prepared by listing all the accounts and their balances to ensure that the debits equal the credits.
Conclusion
Accounting is a vital aspect of any business, as it enables companies to track their financial performance and make informed decisions. By understanding key concepts such as the basic accounting equation, income statement, and balance sheet, businesses can ensure their financial records are accurate and transparent.
FAQs
Q: What is the difference between an income statement and a balance sheet?
A: An income statement shows a company’s revenues and expenses over a period of time, while a balance sheet shows a company’s financial position at a specific point in time.
Q: How do you calculate working capital?
A: Working capital is calculated by subtracting current liabilities from current assets.
Q: Why is depreciation important in accounting?
A: Depreciation is important because it allows companies to allocate the cost of assets over their useful life, helping to accurately reflect their value on the balance sheet.
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