FAC1502 FINANCIAL ACCOUNTING
ELEMENTARY CALCULATIONS
EXAMINATION TEST COMPLETE
QUESTIONS AND ANSWERS FULL
SOLUTION VERIFIED
●● Liabilities
Answer: Amount that company owes
●● Equity
Answer: Amount invested in company by owners; owners claim no
assets
●● Accounting equation
Answer: Assets = liabilities + equity
●● Truism in business
Answer: Company never receives greater than it gives & never gives
greater than it receives
●● 4 Rules of debits & credits
Answer: 1. Debit amount received; credit amount given up
,2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
4. Total debits = total credits
●● Making an ethical decision
Answer: 1. Identify ethical concerns- use personal ethics to recognize
concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances
●● Fraud
Answer: Intentional manipulation- focus on prevention. Once fraud is
committed, loses are rarely retrieved.
●● Fraud Triangle
Answer: Opportunity (low risk of being caught), Financial Pressure
(incentive), Rationalization (making situation justifiable)
●● GAAP (generally accepted accounting principles)
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
, ●● SEC- Securities and Exchange Commission
Answer: Federal agency congress has charged to set reporting rules for
org that sell ownership shares to public
●● FASB (Financial Accounting Standards Board)
Answer: Independent group of full-time members responsible for setting
accounting rules
●● IASB (international accounting standards board)
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
●● Measurement/cost principle
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
●● Revenue Recognition Principle
Answer: Recognition = recording
ELEMENTARY CALCULATIONS
EXAMINATION TEST COMPLETE
QUESTIONS AND ANSWERS FULL
SOLUTION VERIFIED
●● Liabilities
Answer: Amount that company owes
●● Equity
Answer: Amount invested in company by owners; owners claim no
assets
●● Accounting equation
Answer: Assets = liabilities + equity
●● Truism in business
Answer: Company never receives greater than it gives & never gives
greater than it receives
●● 4 Rules of debits & credits
Answer: 1. Debit amount received; credit amount given up
,2. Debuts on left; credits on the right
3. In each transactions; list debits first (good) & credits last (bad)
4. Total debits = total credits
●● Making an ethical decision
Answer: 1. Identify ethical concerns- use personal ethics to recognize
concern
2. Analyze options- consider all good & bad consequences
3. Make ethical decision- choose best option given circumstances
●● Fraud
Answer: Intentional manipulation- focus on prevention. Once fraud is
committed, loses are rarely retrieved.
●● Fraud Triangle
Answer: Opportunity (low risk of being caught), Financial Pressure
(incentive), Rationalization (making situation justifiable)
●● GAAP (generally accepted accounting principles)
Answer: Financial accounting is governed by concepts & rules.
1. Relevant info affects decision of user
2. Reliable info trusted by users
3. Comparable info aids in contrasting organizations
, ●● SEC- Securities and Exchange Commission
Answer: Federal agency congress has charged to set reporting rules for
org that sell ownership shares to public
●● FASB (Financial Accounting Standards Board)
Answer: Independent group of full-time members responsible for setting
accounting rules
●● IASB (international accounting standards board)
Answer: Group that identifies preferred accounting practices &
encourages global acceptance; issues IFRS
●● Measurement/cost principle
Answer: Accounting info based on actual cost.
-if cash is given for a service, cost is measured by cash paid
-if other is exchanged (car traded for truck), cost is measured as cash
value of what is given up or received
This ensure reliability, verifiability
●● Revenue Recognition Principle
Answer: Recognition = recording
