D196 EXAM QUESTIONS AND VERIFIED ANSWERS
GAAP - Answers - Set of accounting standards in the United States
IASB (International Accounting Standards Board) - Answers - the organization formed to
develop worldwide accounting standards
Financial accounting cycle - Answers - 1) analyze transactions(business documents ie
structure data) , 2)record effects(design code or system that captures data).
3)summarize effects(distil cumulative effects of even trillions of transactions) 4) prepare
reports(decision makers need to know)
Owner's Equity - Answers - the amount remaining after the value of all liabilities is
subtracted from the value of all assets
How is each amount calculated in a common size income statement? - Answers - Each
amount is expressed as a percentage of sales for the year
What is an asset ? - Answers - Anything of value that is owned
What is an example of an asset ? - Answers - Accounts receivable
What is a liability? - Answers - the legal obligation to pay debts
What is the definition of revenue ? - Answers - Money earned from providing a product
or service
Cost of Goods Sold - Answers - the amount of money a firm spent to buy or produce the
products it sold during the period to which the income statement applies
Operating Activities - Answers - Cash flow activities that include the cash effects of
transactions that create revenues and expenses and thus enter into the determination of
net income.
Balance Sheet - Answers - A financial statement that reports assets, liabilities, and
owner's equity on a specific date.
Statement of Cash Flows - Answers - A financial statement that provides financial
information about the cash receipts and cash payments of a business for a specific
period of time.
When is vertical financial statement analysis most valuable ? - Answers - When
comparing companies in similar industries
, Which section of the SEC's website contains company annual report on form 10-K
filings ? - Answers - EDGAR
What is the definition of expense ? - Answers - The amount of assets consumed
through business operations
Which below is a revenue item ?
A) cash
B) sales
C) loan payable
d) accounts receivable - Answers - B
Which type of activities are financing activities? - Answers - those activities whereby
cash is obtained from or repaid to owners and creditors
Purpose of Income Statement - Answers - Portrays results of operations of a company
over a period of time
Operating Activities - Answers - Activities that are part of the day to day business of a
company
Purpose of a statement of cash flows - Answers - Portrays operating, financing, and
investing cash flows of a company over a period of time.
Which group establishes financial accounting rules in the United States ? - Answers -
Financial Accounting Standards Board
3 Primary Financial Reports - Answers - Income statement, balance sheet, statement of
cash flows
A company paid $5,000 cash in advertising costs - Answers - Assets decrease by
$5000, expenses increase by $5000
Which type of account are accounts payable and notes payable both examples of ? -
Answers - Liability
The amount of liabilities and equity must always be equal to - Answers - Assets
How is gross profit computed ? - Answers - Sales minus cost of goods sold
Which type of account is retained earnings? - Answers - Revenue
Which item is an operating activity ?
a) paying employees
b) buying equipment
c) distributing dividends
GAAP - Answers - Set of accounting standards in the United States
IASB (International Accounting Standards Board) - Answers - the organization formed to
develop worldwide accounting standards
Financial accounting cycle - Answers - 1) analyze transactions(business documents ie
structure data) , 2)record effects(design code or system that captures data).
3)summarize effects(distil cumulative effects of even trillions of transactions) 4) prepare
reports(decision makers need to know)
Owner's Equity - Answers - the amount remaining after the value of all liabilities is
subtracted from the value of all assets
How is each amount calculated in a common size income statement? - Answers - Each
amount is expressed as a percentage of sales for the year
What is an asset ? - Answers - Anything of value that is owned
What is an example of an asset ? - Answers - Accounts receivable
What is a liability? - Answers - the legal obligation to pay debts
What is the definition of revenue ? - Answers - Money earned from providing a product
or service
Cost of Goods Sold - Answers - the amount of money a firm spent to buy or produce the
products it sold during the period to which the income statement applies
Operating Activities - Answers - Cash flow activities that include the cash effects of
transactions that create revenues and expenses and thus enter into the determination of
net income.
Balance Sheet - Answers - A financial statement that reports assets, liabilities, and
owner's equity on a specific date.
Statement of Cash Flows - Answers - A financial statement that provides financial
information about the cash receipts and cash payments of a business for a specific
period of time.
When is vertical financial statement analysis most valuable ? - Answers - When
comparing companies in similar industries
, Which section of the SEC's website contains company annual report on form 10-K
filings ? - Answers - EDGAR
What is the definition of expense ? - Answers - The amount of assets consumed
through business operations
Which below is a revenue item ?
A) cash
B) sales
C) loan payable
d) accounts receivable - Answers - B
Which type of activities are financing activities? - Answers - those activities whereby
cash is obtained from or repaid to owners and creditors
Purpose of Income Statement - Answers - Portrays results of operations of a company
over a period of time
Operating Activities - Answers - Activities that are part of the day to day business of a
company
Purpose of a statement of cash flows - Answers - Portrays operating, financing, and
investing cash flows of a company over a period of time.
Which group establishes financial accounting rules in the United States ? - Answers -
Financial Accounting Standards Board
3 Primary Financial Reports - Answers - Income statement, balance sheet, statement of
cash flows
A company paid $5,000 cash in advertising costs - Answers - Assets decrease by
$5000, expenses increase by $5000
Which type of account are accounts payable and notes payable both examples of ? -
Answers - Liability
The amount of liabilities and equity must always be equal to - Answers - Assets
How is gross profit computed ? - Answers - Sales minus cost of goods sold
Which type of account is retained earnings? - Answers - Revenue
Which item is an operating activity ?
a) paying employees
b) buying equipment
c) distributing dividends
