Introduction to Financial Statements
12 important questions on Introduction to Financial Statements
Balance sheet
Income Statement
Statement of Cash flows
> describes where the enterprise stands at a specific date
Income Statement
> Depicts the revenue and expenses for a designated period of time
Statement of Cash flows
> Depicts the sources and users of cash for a period of time
How is the business financed?
- Liabilities
- owner equity (Financing activities)
1. Internal and external users of a hospitality business’s financial statements use the statements to get information about:
a. the hospitality operation’s total debt.
b. the amount of total revenue generated by the operation during the last accounting period.
c. the operation’s ability to meet its current obligations.
d. all of the above.
d. all of the above.
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2. Which of the following are the basic financial statements prepared by hospitality businesses?
a. statement of income, equity statement, balance sheet, statement of cash flows
b. chart of accounts, statement of retained earnings, accounts receivable, cost of sales
c. statement of current liabilities, statement of assets, revenue statement, statement of expenses
d. general ledger, chart of accounts, statement of paid-in capital, statement of cost of goods sold
3. The financial document that provides information about the results of a company’s operations over a period of time is:
a. the balance sheet.
b. the statement of cash flows.
c. the chart of accounts.
d. the statement of income.
. In the sequence of accounting events, the statement of income is generally prepared:
a. at the beginning of the accounting cycle.
b. at the end of the accounting period.
c. at the beginning of the fiscal year.
d. at the beginning of the calendar year.
5. Which of the following hospitality income statement entries are operating expenses?
a. property taxes and rent
b. credit card fees and advertising
c. interest expense and property insurance
d. Depreciation
The statement of retained earnings for a corporation shows:
a. changes in equity that occurred during an accounting period.
b. the aggregate dollar total of all shares of stock issued by the corporation.
c. the price/earnings ratio of the company.
d. the unpaid balance of all mortgage notes of the company.
The purpose of a balance sheet is to:
a. prevent an imbalance between expenses and revenue.
b. show the results of operations of a company on a given date.
c. show the financial position of a company over a specified period of time.
d. show the financial position of a company on a given date.
On a balance sheet, total assets must always equal:
a. total equity.
b. total liabilities and stockholders’ (owners’) equity.
c. total liabilities.
d. total capital expenses.
The purpose of a statement of cash flows is to:
a. provide information about where a company’s cash came from and where it was spent.
b. maintain the balance between stock authorized and stock actually issued in a corporate form of business.
c. control the internal flow of cash within the company.
d. provide a check and balance capability to the company for cash deposited in banks.
The financial statement that provides information about cash receipts and payments concerning the operating, investing, and financing activities of a business is called the:
a. statement of income.
b. balance sheet.
c. statement of cash flows.
d. equity statement.
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