How can Retained Earnings show a negative balance?

Accounting by Geoffrey

Financial Intelligence

  1. What is the Balance Sheet?

 

  1. How is Profitability like a grade you receive for a course and Equity is like your GPA?

 

  1. Define “Equity”
  1. Define “Retained Earnings”
  1. How can Retained Earnings show a negative balance?
  1. What is the Accounting equation?
  1. The Balance Sheet shows the company’s financial position at a point in time. TRUE/FALSE
  1. Reference the Balance Sheet in the Appendix and enter the account balances:
  1. Assets ____________Liabilities____________Equity___________ for 12/31/2012
  2. Retained Earnings ______________12/31/12
  3. Inventory ___________ 12/31/11
  4. Current Assets ______________12/31/11
  5. Current Liabilities _____________12/31/12
  1. Give an example of a cash equivalent.
  1. Define the account “Allowance for Bad Debts”
  1. Why are assets, such as, Property, Plant and Equipment recorded at cost?
  1. Land is a depreciable asset. TRUE/FALSE
  1. Define “Goodwill”
  1. Goodwill is amortized over a 30 year period. TRUE/FALSE
  1. Give an example of an Intangible Asset.
  1. How should Intangible Assets be amortized?
  1. Define “Current Liabilities” and “Long Term Liabilities” and give an example of each
  1. What is the primary difference between Common and Preferred stock?
  1. Define “Dividends”
  1. Dividends are paid out of Retained Earnings. TRUE/FALSE
  1. List the fundamental accounting equation.
  1. Using the Balance Sheet in the appendix, enter the following for 12/31/12
  1. Assets ____________
  2. Liabilities ____________
  3. Equity ____________
  1. The net income or loss is transferred to what Balance Sheet account?
  1. Why could the purchase of raw materials at a “good deal” adversely affect the Balance Sheet.

Part 4

  1. Define Owner Earnings.
  1. Profit is not the same as Cash. TRUE/FALSE
  1. List the three reasons why profit is not the same as cash
  1. _________________________________________
  2. _________________________________________
  3. _________________________________________
  1. What is the disparity regarding Sweet Dreams with respect to customer receipts and vendor payments?
  1. In the case of Fine Apparel, how can the company lose money every month yet have a positive cash flow?
  2. What are the three categories of cash flow as reported on the Statement of Cash Flows?
  1. __________________________________________
  2. __________________________________________
  3. __________________________________________
  1. Investing activities refers to investments made by the company not by its owners. TRUE/FALSE
  1. Why would you add depreciation to net income on the Statement of Cash Flows?
  1. Give an example of an Operating activity?
  1. Give an example of an Investing activity?
  2. Give an example of a Financing activity?
  1. Define Free Cash Flow