Acc101 Final Essay Q

Q1/ What are the main four nancial statements?
1. Income Statement (also known as Pro t and Loss Statement): The income statement shows a company's revenues,
expenses, and net income or loss over a speci c period. It provides information on the company's ability to generate pro t
by comparing its revenues with its expenses.
2. Balance Sheet: The balance sheet presents a snapshot of a company's nancial position at a speci c point in time. It
consists of three main sections: assets, liabilities, and equity. The balance sheet shows what a company owns (assets),
what it owes (liabilities), and the remaining value for shareholders (equity).
3. Cash Flow Statement: The cash ow statement reports the in ows and out ows of cash and cash equivalents during a
speci c period. It provides information on how a company generates and uses cash. The statement is divided into three
sections: operating activities, investing activities, and nancing activities.
4. Statement of Retained Earnings (also known as Statement of Owner's Equity): The statement of retained earnings
shows the changes in a company's retained earnings during a speci c period. It summarizes the net income or loss and any
dividends declared. The statement of retained earnings is often combined with the income statement and other
comprehensive income to calculate the change in equity.
Q2/ List and describe the four inventory valuation methods:
1) FIFO: stands for First-In, First-Out a method that assumes costs ow in the order incurred. In this, merchandise that is
bought rst, will be sold rst.
2) LIFO: stands for Last-In, First-Out Assumes costs ow in the reverse order incurred. So merchandise bought last, will be
sold rst.
3) Weighted Average this method assumes costs ow at an average of the costs available. In this method, we calculate the
average cost, and use that amount. This method tends to smooth out price changes.
4) Speci c identi cation: in this method, management decides which of each merchandise is to be sold, at what quantity
and at which price.
Q3/ What are the various steps involved in accounting cycle?
1. Analyzing and Classify Data about an Economic Event.

2. Journalizing the transaction.
3. Posting from the Journals to General Ledger.
4. Preparing the Unadjusted Trial Balance.
5. Recording Adjusting Entries.
6. Preparing the Adjusted Trial Balance.
7. Preparing Financial Statements.
8. Recording Closing Entries.
9. Preparing a Closing Trial Balance.
10. Recording Reversing Entries.
Q4/ Characteristics of Corporations

Advantages
• Separate legal entity
• Limited liability of stockholders
• Transferable ownership rights
• Continuous life
• Lack of mutual agency for stockholders
• Ease of capital accumulation
Disadvantages
• Governmental regulation
• Corporate taxation
K&M Inc.
Cash Flow Statement
For the Year Ended December 31, 2020
Amounts in thousands of Saudi Riyal
Operating Activities:
Net income 150
Adjustments for:
Depreciation expense 10
Increase in accounts receivable (30)
Decrease in inventory 20
Increase in accounts payable 15
Net cash provided by operating activities 165
Investing Activities:
Proceeds from sale of land 50
Gain on sale of land 5
Purchase of equipment on account (80)
Net cash used in investing activities (25)
Financing Activities:
Payment of dividends (25)
Proceeds from issuance of common stock 40
Net cash provided by nancing activities 15
Net increase in cash during 2020 155

Cash, January 1, 2020 100
Cash, December 31, 2020 255
ABC Company
Bank Reconciliation
May 31, 20XX
Bank Statement Balance: $100,000

Add: Deposit in transit: $20,000
Adjusted Bank Balance: $120,000
Cash Account Balance: $85,500

Add: Collection by the bank: $12,500
Add: Erroneously credited deposit: $10,000
Adjusted Cash Balance: $108,000

Outstanding Checks:
Outstanding checks: $15,000

Less: Outstanding checks: $15,000
Adjusted Bank Balance per Books: $105,000

Adjusted Bank Balance per Books: $105,000
Di erences:
Bank service charge: TBD
NSF check: $3,900
Error in recording check: $900
1. Journal Entry:
Jul. 1st
Debit: Retained Earnings SR 30,000
Credit: Common Dividends Payable SR 30,000
2. Journal Entry: No entry required on August 1st
3. Journal Entry:
Sep. 1st
Debit: Common Dividends Payable SR 30,000
Credit: Cash SR 30,000
:
1. Straight-line method:
- Depreciation Expense per year: $47,500
2. Units-of-production method:
- Year 1: Depreciation Expense = ($190,000 - $20,000) / 363,400 units * 121,400 units= 57,058
3. Double-declining-balance method:
- Year 1: Depreciation Expense = ($210,000 - $0) * 50%
• Determine the straight-line depreciation rate: 1/Useful Life = 1/4 = 0.25 or 25%
• Double the straight-line rate to get the Double-declining-balance rate: 2 * 25% = 50%
• Calculate the depreciation expense for each year:
- Year 1: $210,000 * 50% = $105,000
- Year 2: ($210,000 - $105,000) * 50% = $52,500
- Year 3: ($210,000 - $105,000 - $52,500) * 50% = $26,250
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Acc101 Final Essay Q

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Q1/ What are the main four nancial statements?

Q2/ List and describe the four inventory valuation methods:

Q3/ What are the various steps involved in accounting cycle?

1. Analyzing and Classify Data about an Economic Event.

Q4/ Characteristics of Corporations

Net increase in cash during 2020 155

Bank Statement Balance: $100,000

Cash Account Balance: $85,500

Adjusted Bank Balance: $120,000

Adjusted Bank Balance: $120,000

Adjusted Cash Balance: $108,000

2. Journal Entry: No entry required on August 1st

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