Q & As in Accounting

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As to explore my field of study, I read the textbook called Financial Accounting. This book generally introduces the basic structure of the worksheet and journal entries when we record a transaction. Also, it provides me a great amount of information in understanding basic equations and rules of recording journal entries. In order to find answers to my list of questions, I took some important parts from the textbook into my Q & A lists.

Here are my ten questions and answers provided that about my major in Accounting:

1. As I know, long-term objective for all business is to use cash to make more cash, in this circumstance, what can be the definition for operating cycle?

The operating cycle are also known as cash-to-cash cycle, it is the time that takes for a company to pay cash to suppliers, sell goods and services to customers, and then collect cash from customers.

2. What sources can be includes in cash expenditures?

There are three kinds of expenses are included in cash expenditures: debt payments, asset purchases, and expenses.

3. What means gains (or loses) on sales of assets?

Gains are increases in assets or decreases in liabilities form peripheral transactions; loses are decreases in assets or increases in liabilities form peripheral transactions. For example, in 2008, Papa John’s sold restaurants costing $12 million for $9 million, recognizing a Loss on restaurant sold of $3 million.

4. In which circumstance, cash can be paid either before, during, or after an expense is incurred?

Cash is paid before the expense is incurred to generate revenue; cash is paid in the same period as the expense is incurred to generate revenue; cash is paid after the cost is incurred to generate revenue.

5. What is a balance sheet?

Assets= Liabilities + Owner’s Equity

Specifically, it reports the amount of assets, liabilities, and stockholders’ equity of an accounting entity at a point of time.

6. What is net income?

Net income is the excess of total revenues over total expenses.

7. Is it possible on an income statement that total expense are greater than the total revenue to make it negative number?

It is possible to have a negative number that expenses are greater than the revenue, and it can be called net loses.

8. Why is the statement of cash flows important?

It reports inflows and outflows of cash for a stated period of time classified into three categories: operating, investing, and financing activities.

9. When you analysis a transaction model, which side is debit (or credit) belongs to?

Debit is on the left side of an account, and credit vice versa.

10. When we record a transaction, do we have to write it in chronological order?

Yes, it is required to record transaction in time order in the journal entry.