Which statement shows assets, liabilities and equity at a date?
Balance sheet.
A LITTLE HEAD START
Accounting basics · 25 quick recall questions
Accounting · 25 cards · Recall starter library
Original introductory questions on statements, costs and break-even analysis. A general revision aid, not tax advice or a complete course. Check terminology against your syllabus.
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Which statement reports revenue and expenses for a period?
Income statement.
What is the basic accounting equation?
Assets = liabilities + equity.
What does a cash-flow statement track?
Cash inflows and outflows over a period.
Is profit necessarily equal to cash generated?
No. Timing and non-cash items can make them differ.
What is an asset?
An economic resource controlled by the business.
What is a liability?
A present obligation of the business.
What is equity in the accounting equation?
Assets minus liabilities.
What is revenue?
Income from the business’s ordinary activities.
What is an expense?
A cost recognized in determining profit for a period.
Revenue is 9,000 and expenses are 6,500. What is profit?
2,500.
Assets are 18,000 and liabilities are 7,000. What is equity?
11,000.
Is a bank loan received normally sales revenue?
No. It creates a liability rather than sales revenue.
What happens to total fixed costs within the relevant range?
They stay constant as activity changes.
What happens to total variable costs as units increase, at a constant unit rate?
They increase in proportion to the number of units.
How do you calculate contribution margin per unit?
Selling price per unit minus variable cost per unit.
Price is 30 and variable cost is 18 per unit. What is unit contribution?
12 per unit.
What does contribution first help cover?
Fixed costs; any excess contributes to operating profit.
What is the break-even point?
The sales level where total revenue equals total costs.
What is operating profit at break-even?
Zero.
How do you calculate break-even units for a single product with positive unit contribution?
Total fixed costs divided by contribution margin per unit.
Fixed costs are 3,600 and unit contribution is 12. What are break-even units?
300 units.
If fixed costs rise and unit contribution stays positive and unchanged, what happens to break-even units?
They increase.
If positive unit contribution rises and fixed costs stay unchanged, what happens to break-even units?
They decrease.
How do you calculate margin of safety in sales units?
Actual or budgeted units sold minus break-even units.
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