Fina cial & Managerial Accounting Exam 1
Questions With Correct Answers 2026
Accounting - CORRECT ANSWER -an information and measurement system that identifies, records and
communicates relevant, reliable and comparable information about an organizations activities
Recordkeeping/Bookkeeping - CORRECT ANSWER -the recording of transactions and events, either
manually or electronically
External Users - CORRECT ANSWER -not directly involved in running the organization, need to all
coincide with one method
Internal Information Users - CORRECT ANSWER -those directly involved in managing and operating an
organization, not so concerned with others
Ethics - CORRECT ANSWER -beliefs that distinguish right from wrong
Measurement Principle (cost principle) - CORRECT ANSWER -accounting information is based on actual
cost
Revenue (sales) Recognition - CORRECT ANSWER -provides guidance on when a company must
recognize revenue
Expense Recognition Principle (matching principle) - CORRECT ANSWER -record the expenses it incurred
to generate the revenue reported
Full Disclosure - CORRECT ANSWER -prescribes that a company report the details behind financial
statements that would impact users' decisions.
Accounting Equation (simple) - CORRECT ANSWER -Assets = Liabilities + Equity
, Assets - CORRECT ANSWER -resources a company owns or controls
Liabilities - CORRECT ANSWER -creditors' claims on assets (reflect company obligations to provide assets,
products or services to others)
Equity (net assets/residual equity) - CORRECT ANSWER -the owner's claim on assets, has two parts: -
contributed capital
-retained earnings
Contributed Capital - CORRECT ANSWER -amount that stockholders invest in the company included
under common stock
Retained Earnings - CORRECT ANSWER -refer to income (revenues less expenses) that has not been
distributed to its stockholders
net income - cash dividends = retained earnings
Dividends - CORRECT ANSWER -distribution of assets to stockholders
Revenues - CORRECT ANSWER -Increase retained earnings and are resources generated from a
company's earnings activities
Expenses - CORRECT ANSWER -decrease retained earnings and are the cost of assets or services used to
earn revenues
Accounting Equation (full and complicated) - CORRECT ANSWER -Assets = liabilities + Equity [contributed
capital + retained earnings]
Assets = liabilities + common stock + retained earnings [- dividends + revenue - expenses]
Net Income - CORRECT ANSWER -when revenues exceed expenses (increase equity)
revenue - expenses
Questions With Correct Answers 2026
Accounting - CORRECT ANSWER -an information and measurement system that identifies, records and
communicates relevant, reliable and comparable information about an organizations activities
Recordkeeping/Bookkeeping - CORRECT ANSWER -the recording of transactions and events, either
manually or electronically
External Users - CORRECT ANSWER -not directly involved in running the organization, need to all
coincide with one method
Internal Information Users - CORRECT ANSWER -those directly involved in managing and operating an
organization, not so concerned with others
Ethics - CORRECT ANSWER -beliefs that distinguish right from wrong
Measurement Principle (cost principle) - CORRECT ANSWER -accounting information is based on actual
cost
Revenue (sales) Recognition - CORRECT ANSWER -provides guidance on when a company must
recognize revenue
Expense Recognition Principle (matching principle) - CORRECT ANSWER -record the expenses it incurred
to generate the revenue reported
Full Disclosure - CORRECT ANSWER -prescribes that a company report the details behind financial
statements that would impact users' decisions.
Accounting Equation (simple) - CORRECT ANSWER -Assets = Liabilities + Equity
, Assets - CORRECT ANSWER -resources a company owns or controls
Liabilities - CORRECT ANSWER -creditors' claims on assets (reflect company obligations to provide assets,
products or services to others)
Equity (net assets/residual equity) - CORRECT ANSWER -the owner's claim on assets, has two parts: -
contributed capital
-retained earnings
Contributed Capital - CORRECT ANSWER -amount that stockholders invest in the company included
under common stock
Retained Earnings - CORRECT ANSWER -refer to income (revenues less expenses) that has not been
distributed to its stockholders
net income - cash dividends = retained earnings
Dividends - CORRECT ANSWER -distribution of assets to stockholders
Revenues - CORRECT ANSWER -Increase retained earnings and are resources generated from a
company's earnings activities
Expenses - CORRECT ANSWER -decrease retained earnings and are the cost of assets or services used to
earn revenues
Accounting Equation (full and complicated) - CORRECT ANSWER -Assets = liabilities + Equity [contributed
capital + retained earnings]
Assets = liabilities + common stock + retained earnings [- dividends + revenue - expenses]
Net Income - CORRECT ANSWER -when revenues exceed expenses (increase equity)
revenue - expenses
