Corporate Finance - Ivy Software (MBA
Prepworks) Test Questions and Verified
Answers (Graded A+)
• GAAP -✓✓Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
• Economic Entity -✓✓Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
• Going Concern -✓✓The accounting assumption that a business is expected to operate
indefinitely. Assumes the company will continue so asset values are at a historical cost.
• Monetary Unit -✓✓Financial transactions are denominated in a stable unit of measure.
Everything is in US dollars
• Accounting Periods -✓✓The results of operations for an entity must be reported on a
periodic basis, usually a year
• Revenue/Expense Matching -✓✓All expenses incurred to generate revenues should
be recognized during the same period as those revenues
• Conservatism -✓✓Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
• Understandability -✓✓Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
• Relevance -✓✓The quality of information that indicates the information makes a
difference in a decision.
• Comparability -✓✓Ability to compare the accounting information of different companies
because they use the same accounting principles. Quantitative assessment
• Consistency -✓✓Use of the same accounting principles and methods from year to year
within a company. Allows information to be compared over time.
• Materiality -✓✓An item should not be reported if it is not large enough to influence the
users of a financial statement.
• Who is the rule making body for GAAP? -✓✓Financial Accounting Standards Board
(FASB)
Prepworks) Test Questions and Verified
Answers (Graded A+)
• GAAP -✓✓Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
• Economic Entity -✓✓Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
• Going Concern -✓✓The accounting assumption that a business is expected to operate
indefinitely. Assumes the company will continue so asset values are at a historical cost.
• Monetary Unit -✓✓Financial transactions are denominated in a stable unit of measure.
Everything is in US dollars
• Accounting Periods -✓✓The results of operations for an entity must be reported on a
periodic basis, usually a year
• Revenue/Expense Matching -✓✓All expenses incurred to generate revenues should
be recognized during the same period as those revenues
• Conservatism -✓✓Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
• Understandability -✓✓Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
• Relevance -✓✓The quality of information that indicates the information makes a
difference in a decision.
• Comparability -✓✓Ability to compare the accounting information of different companies
because they use the same accounting principles. Quantitative assessment
• Consistency -✓✓Use of the same accounting principles and methods from year to year
within a company. Allows information to be compared over time.
• Materiality -✓✓An item should not be reported if it is not large enough to influence the
users of a financial statement.
• Who is the rule making body for GAAP? -✓✓Financial Accounting Standards Board
(FASB)
