Question

1) What are Generally Accepted Accounting Principles (GAAP)? (1 point)

2) Describe the format of the income statement. (1 point)

3) What is an expense? Provide two examples of expenses that can be found on the income statement. (2 points)

4) Review the income statement format. Why is operating income different from net income? (1 point)

5) Explain what is meant by non-operating income and provide an example (1 points)

6) What is an asset? (1 point)

7) What is a liability? (1 point)

8) What is the difference between liabilities and equity (1 point)

9) How do we arrive at the Net Income in an Income Statement? (1 point)

10) What is the basic accounting equation? (1 point)

11) Place the following Balance Sheet entries into the appropriate column. (4 points)

Cash                            Bonds Payable            Long-term Debt                     

Investments                 Accounts payable        Accounts receivable               

Equipment                   Accrued Expenses

Answer 1

1) What are Generally Accepted Accounting Principles (GAAP)?
Answer: GAAP (generally accepted accounting principles) is a collection of commonly-followed accounting rules and standards for financial reporting. so a common accounting rule will be followed by each nation while recording the transaction in the books.

2) Describe the format of the income statement.

Answer : The Income Statement format is revenues, expenses, and profits (or losses) of an entity over a specified period of time. In other words, it is a description of the entities profitability over a period of time (usually quarterly or annually).

3) What is an expense? Provide two examples of expenses that can be found on the income statement.

Answer : Expenditure is an outflow of money, or any form of fortune in general, to another person or group to pay for an item or service, or for a category of costs. For Example: For a tenant, rent is an expense. For students or parents, tuition is an expense. these both are also included in the income statement.

4) Review the income statement format. Why is operating income different from net income?

Answer : The key difference between operating income and net income is that operating income refers to the income earned by a business organization during the period under consideration from its principal revenue-generating activities and does not consider non-operating income and non-operating expenses, whereas, net Income refers to earnings of the business which is earned during the period after considering all the expenses incurred by the company during that period.

5) Explain what is meant by non-operating income and provide an example.

Answer : Non-operating income, in accounting and finance, is gains or losses from sources not related to the typical activities of the business or organization. Non-operating income can include gains or losses from investments, property or asset sales, currency exchange, and other atypical gains or losses.

6) what is an Asset?

Answer : An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit. Assets are reported on a company's balance sheet and are bought or created to increase a firm's value or benefit the firm's operations.

7) What is an Liability?

Answer : Liabilities are defined as a company's legal financial debts or obligations that arise during the course of business operations. ... Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, earned premiums, unearned premiums, and accrued expenses.

8) What is the difference between liabilities and equity ?

Answer : Equity is a form of ownership in the firm and equity holders are known as the 'owners' of the firm and its assets. Liabilities are amounts that are owed by the firm. Long term liabilities are owed by a firm for more than one year, and short term liabilities are for less than one year.

9) How do we arrive at the Net Income in an Income Statement?

Answer :  The net income formula is calculated by subtracting total expenses from total revenues. Many different textbooks break the expenses down into subcategories like cost of goods sold, operating expenses, interest, and taxes, but it doesn't matter. All revenues and all expenses are used in this formula.

10)  What is the basic accounting equation?

Answer : Assets = Libilities + shareholder's equity

11) Answer :

Liability	Assets
Long Term Debts	Cash
Accoounts Payable	Investment
Bonds Payable	Equipment
Accrued Expenses	Accouts receivables

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