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COMMERCE 1AA3 Study Guide - Comprehensive Midterm Guide: 2 On, Faithful Representation, A Question Of Balance


Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Emad Mohammad
Study Guide
Midterm

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McMaster
COMMERCE 1AA3
MIDTERM EXAM
STUDY GUIDE

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Commerce 1AA3 : Financial Accounting C03
Instructor : Emad Mohammad
September 7th 2016
Assets
1.measurable
2. has use in business
Liability
1. Future economic sacrifice
2. Measuring
3. Enforceable by law
4. Resulting from a past transaction
Liabilities are not explicitly stated
GAAP is for private companies (you cannot buy their stock publicly)
Four Financial Statements
1. Income Statement (Measures the financial performance)
2. Statement of Retained Earnings (Pool of net incomes and losses)
3.Balance Sheet (Measures the health of the company)
4. Statement of Cash Flow (Measures company’s liquidity - ability to pay short term liabilities)
Can you have a negative retained earning?
- Yes
Can you have income, but no cash?
- Yes, due to accounts receivable
Question Financial Statement Answer
How well did the company
perform during the year?
Income Statement Revenues - Expenses = Net
income or net loss
Why did the company’s
retained earnings change
during the year?
Statement of retained
Earnings
Beginning retained earnings
+ net income/- Net Loss -
dividends = Ending reatined
earnings
What is the company’s
financial position at year-
end?
Balance Sheet Assets = Liabilities + Owner’s
Equity
How much cash did the
company generate and
spend during the year?
Statement of Cash Flows Operating Cash Flows
+/- Investing cash flows
+/- Financing cash flows
= Increase/decrease in cash
Balance sheet from this year,
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Balance sheet from last year
And this year’s net income
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