IVY MBA Financial Managerial Accounting
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. What are the two primary functions of financial accounting?
Answer: To measure information from transactions and events, and to
communicate this information to external decision makers.
2. What is the expanded accounting equation?
Answer: Assets = Liabilities + Shareholders’ Equity
3. What does retained earnings consist of?
Answer: Retained Earnings = (Revenues − Expenses) − Dividends
4. What are the four main financial statements?
Answer: Income Statement, Statement of Stockholders’ Equity, Balance Sheet,
and Statement of Cash Flows.
5. What does the income statement report?
Answer: Revenues, expenses, and net income for a specific period of time.
6. What does the balance sheet show?
Answer: The financial position of a company as of a specific date, showing Assets
= Liabilities + Shareholders’ Equity.
7. What are the three sections of the statement of cash flows?
Answer: Operating activities, Investing activities, and Financing activities.
8. What are some examples of assets?
Answer: Cash, accounts receivable, supplies, prepaid insurance, inventory, and
equipment.
,9. What accounts are included in liabilities?
Answer: Accounts payable, wages payable, interest payable, deferred revenue,
and notes payable.
10. What is the formula for net income?
Answer: Net Income = Revenues − Expenses
11. What is the revenue recognition principle?
Answer: Revenue should be recognized when the performance obligation is
satisfied.
12. What does the expense recognition principle state?
Answer: Expenses should be recognized in the same accounting period as the
related revenues.
13. What are adjusting journal entries (AJEs)?
Answer: Entries made at the end of the accounting period to ensure revenue and
expense recognition principles are followed.
14. What are the two broad categories of adjusting journal entries?
Answer: Deferrals (prepayments) and Accruals.
15. What happens if an adjusting journal entry for deferred revenue is not
made?
Answer: Liabilities would be overstated and Shareholders’ Equity would be
understated.
16. What is net book value?
Answer: Net Book Value = Asset Balance − Accumulated Depreciation
17. What is the difference between permanent and temporary accounts?
Answer: Permanent accounts carry their balances forward to future periods, while
temporary accounts are closed at the end of the accounting period.
18. What is the income summary account used for?
Answer: It is a temporary clearing account used to close revenue and expense
accounts during the closing process.
, 19. What accounts are considered permanent accounts?
Answer: All asset accounts, all liability accounts, and all shareholders’ equity
accounts.
20. What accounts are considered temporary accounts?
Answer: All revenue accounts, all expense accounts, the dividends account, and
the income summary account.
21. What is the DEALOR acronym used for?
Answer: To help remember which accounts increase with debits and which
increase with credits.
22. What is the rule regarding debits and credits in journal entries?
Answer: The total dollar amount of debits must equal the total dollar amount of
credits for each transaction.
23. What is the impact of accrued expenses?
Answer: The expense is recognized before cash is paid in a future period.
24. What are accrued revenues?
Answer: Revenues that are recognized before cash is received in a future period.
25. What does the matching principle refer to?
Answer: Recognizing expenses in the same accounting period as the revenues
they help generate.
26. What is the effect of not making an adjusting entry for accrued interest?
Answer: Liabilities would be understated and Shareholders’ Equity would be
overstated.
27. What are the four closing entries in accounting?
Answer:
1. Close revenue accounts to income summary
2. Close expense accounts to income summary
3. Close income summary to retained earnings
4. Close dividends account to retained earnings
Comprehensive Resource To Help You Ace 2026-2027
Includes Frequently Tested Questions With ELABORATED
100% Correct COMPLETE SOLUTIONS
Guaranteed Pass First Attempt!!
Current Update!!
1. What are the two primary functions of financial accounting?
Answer: To measure information from transactions and events, and to
communicate this information to external decision makers.
2. What is the expanded accounting equation?
Answer: Assets = Liabilities + Shareholders’ Equity
3. What does retained earnings consist of?
Answer: Retained Earnings = (Revenues − Expenses) − Dividends
4. What are the four main financial statements?
Answer: Income Statement, Statement of Stockholders’ Equity, Balance Sheet,
and Statement of Cash Flows.
5. What does the income statement report?
Answer: Revenues, expenses, and net income for a specific period of time.
6. What does the balance sheet show?
Answer: The financial position of a company as of a specific date, showing Assets
= Liabilities + Shareholders’ Equity.
7. What are the three sections of the statement of cash flows?
Answer: Operating activities, Investing activities, and Financing activities.
8. What are some examples of assets?
Answer: Cash, accounts receivable, supplies, prepaid insurance, inventory, and
equipment.
,9. What accounts are included in liabilities?
Answer: Accounts payable, wages payable, interest payable, deferred revenue,
and notes payable.
10. What is the formula for net income?
Answer: Net Income = Revenues − Expenses
11. What is the revenue recognition principle?
Answer: Revenue should be recognized when the performance obligation is
satisfied.
12. What does the expense recognition principle state?
Answer: Expenses should be recognized in the same accounting period as the
related revenues.
13. What are adjusting journal entries (AJEs)?
Answer: Entries made at the end of the accounting period to ensure revenue and
expense recognition principles are followed.
14. What are the two broad categories of adjusting journal entries?
Answer: Deferrals (prepayments) and Accruals.
15. What happens if an adjusting journal entry for deferred revenue is not
made?
Answer: Liabilities would be overstated and Shareholders’ Equity would be
understated.
16. What is net book value?
Answer: Net Book Value = Asset Balance − Accumulated Depreciation
17. What is the difference between permanent and temporary accounts?
Answer: Permanent accounts carry their balances forward to future periods, while
temporary accounts are closed at the end of the accounting period.
18. What is the income summary account used for?
Answer: It is a temporary clearing account used to close revenue and expense
accounts during the closing process.
, 19. What accounts are considered permanent accounts?
Answer: All asset accounts, all liability accounts, and all shareholders’ equity
accounts.
20. What accounts are considered temporary accounts?
Answer: All revenue accounts, all expense accounts, the dividends account, and
the income summary account.
21. What is the DEALOR acronym used for?
Answer: To help remember which accounts increase with debits and which
increase with credits.
22. What is the rule regarding debits and credits in journal entries?
Answer: The total dollar amount of debits must equal the total dollar amount of
credits for each transaction.
23. What is the impact of accrued expenses?
Answer: The expense is recognized before cash is paid in a future period.
24. What are accrued revenues?
Answer: Revenues that are recognized before cash is received in a future period.
25. What does the matching principle refer to?
Answer: Recognizing expenses in the same accounting period as the revenues
they help generate.
26. What is the effect of not making an adjusting entry for accrued interest?
Answer: Liabilities would be understated and Shareholders’ Equity would be
overstated.
27. What are the four closing entries in accounting?
Answer:
1. Close revenue accounts to income summary
2. Close expense accounts to income summary
3. Close income summary to retained earnings
4. Close dividends account to retained earnings
