FINANCIAL ACCOUNTING EXAM ONE
ACTUAL EXAMINATION 2026
COMPREHENSIVE QUESTIONS WITH
DETAILED VERIFIED ANSWERS GRADED
A+
⩥ Accounting Equation. Answer: Assets = Liabilities + Owners' Equity.
This equation is fundamental and must always be true in double entry
accounting.
⩥ Accounting Period. Answer: The period of time for which the
financial results are reported; typically either a month or a quarter or a
year.
⩥ Accounts Payable. Answer: Liability account used to show the
obligation to pay suppliers who have provided goods or services on
credit terms.
⩥ Accounts Payable Turnover. Answer: Accounts Payable Turnover is a
ratio that is used to measure how efficiently a business is paying its
vendors. It is calculated by dividing the credit purchases for the period
by the average accounts payable balance for the period. In the absence of
credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts payable
turned over during the period. For most ratios in this course, we use
,averages when calculating ratios with balance sheet numbers, but this is
not necessary and some may choose to use beginning or ending
balances.
⩥ Accounts Receivable. Answer: Asset account used to show the claim
to receive cash at some future date for goods or services that have been
supplied to a customer on credit terms.
⩥ Accounts Receivable Turnover. Answer: Accounts Receivable
Turnover is a ratio that is used to measure how efficiently a business is
collecting receivables from its customers. It is calculated by dividing the
credit sales for the period by the average accounts receivable balance for
the period. In the absence of credit sales information, we may use total
sales as a substitute. The ratio represents how many times the accounts
receivable turned over during the period. For most ratios in this course,
we use averages when calculating ratios with balance sheet numbers, but
this is not necessary and some may choose to use beginning or ending
balances.
⩥ Accrual. Answer: A revenue amount that is recorded after the revenue
is earned but before the payment is received or an expense amount that
is recorded after it has been incurred but before the payment has been
made. In either case, for an accrual the exchange of cash is expected at
some future point after the initial revenue or expense is recognized.
⩥ Accrual Accounting Method. Answer: This is the accounting method
taught in this course, followed by most companies, and required under
,US GAAP and IFRS. The method follows the revenue recognition
principle, which says that revenue should be recognized in the period in
which it is earned and realizable, not necessarily when the cash is
received and the matching principle which says that expenses should be
recognized in the period in which the related revenue is recognized
rather than when the related cash is paid.
⩥ Accrued Expenses. Answer: Liability account used to record amounts
at the end of an accounting period to recognize expenses that were
incurred in the period but for which no invoice has yet been received nor
payment has yet been made. Examples are salaries/wages payable,
accrued rent expense, accrued legal fees. When the accrual is made, the
debit is to the appropriate expense account (payroll expense, rent
expense, legal expense) and the credit is to the accrued expense account,
which is a liability because it represents an obligation which will need to
be paid in the future. Remember accrued expenses are NOT expenses.
⩥ Accrued Liability. Answer: Liability accounts that record expenses
that have been recognized on the income statement but have not yet been
paid. Similar to accrued expenses.
⩥ Accrued Payroll. Answer: An accrued expense recorded at the end of a
financial period for amounts of payroll that have been worked but not
yet paid. It is a common type of accrued expense. See also
Salaries/Wages Payable.
, ⩥ Accrued Revenue. Answer: An asset account that records revenue that
has been earned and recognized on the income statement but not yet paid
for by the customer. At the time of the accrual, we debit the receivable
account and credit the appropriate accrued revenue account. When the
cash transfer ultimately occurs, we debit the cash account and credit the
receivable account.
⩥ Accumulated Depreciation. Answer: A contra asset account that
includes the cumulative total of all depreciation expenses recorded to
date for specific assets. The credit balance in this account offsets the
debit balance in the asset account which shows the original value of the
asset. When the original asset value is netted against the accumulated
depreciation for the asset you arrive at the net book value of the asset.
⩥ Accumulated other comprehensive income. Answer: An equity
account that consists of cumulative unrealized gains or losses on line
items classified under other comprehensive income. It includes items
such as unrealized gains or losses on investments available for sale,
foreign currency gains or losses, and pension plan gains or losses.
⩥ Adjusting (Journal) Entries. Answer: Entries made to adjust the
balances of asset and liability accounts to reflect changes in their values
due to the passage of time or another implicit transaction.
⩥ Allowance for Doubtful Accounts. Answer: A contra asset account
that nets against Accounts Receivable. It is generally set up as an
estimate of accounts that will ultimately prove to be uncollectible. It is
ACTUAL EXAMINATION 2026
COMPREHENSIVE QUESTIONS WITH
DETAILED VERIFIED ANSWERS GRADED
A+
⩥ Accounting Equation. Answer: Assets = Liabilities + Owners' Equity.
This equation is fundamental and must always be true in double entry
accounting.
⩥ Accounting Period. Answer: The period of time for which the
financial results are reported; typically either a month or a quarter or a
year.
⩥ Accounts Payable. Answer: Liability account used to show the
obligation to pay suppliers who have provided goods or services on
credit terms.
⩥ Accounts Payable Turnover. Answer: Accounts Payable Turnover is a
ratio that is used to measure how efficiently a business is paying its
vendors. It is calculated by dividing the credit purchases for the period
by the average accounts payable balance for the period. In the absence of
credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts payable
turned over during the period. For most ratios in this course, we use
,averages when calculating ratios with balance sheet numbers, but this is
not necessary and some may choose to use beginning or ending
balances.
⩥ Accounts Receivable. Answer: Asset account used to show the claim
to receive cash at some future date for goods or services that have been
supplied to a customer on credit terms.
⩥ Accounts Receivable Turnover. Answer: Accounts Receivable
Turnover is a ratio that is used to measure how efficiently a business is
collecting receivables from its customers. It is calculated by dividing the
credit sales for the period by the average accounts receivable balance for
the period. In the absence of credit sales information, we may use total
sales as a substitute. The ratio represents how many times the accounts
receivable turned over during the period. For most ratios in this course,
we use averages when calculating ratios with balance sheet numbers, but
this is not necessary and some may choose to use beginning or ending
balances.
⩥ Accrual. Answer: A revenue amount that is recorded after the revenue
is earned but before the payment is received or an expense amount that
is recorded after it has been incurred but before the payment has been
made. In either case, for an accrual the exchange of cash is expected at
some future point after the initial revenue or expense is recognized.
⩥ Accrual Accounting Method. Answer: This is the accounting method
taught in this course, followed by most companies, and required under
,US GAAP and IFRS. The method follows the revenue recognition
principle, which says that revenue should be recognized in the period in
which it is earned and realizable, not necessarily when the cash is
received and the matching principle which says that expenses should be
recognized in the period in which the related revenue is recognized
rather than when the related cash is paid.
⩥ Accrued Expenses. Answer: Liability account used to record amounts
at the end of an accounting period to recognize expenses that were
incurred in the period but for which no invoice has yet been received nor
payment has yet been made. Examples are salaries/wages payable,
accrued rent expense, accrued legal fees. When the accrual is made, the
debit is to the appropriate expense account (payroll expense, rent
expense, legal expense) and the credit is to the accrued expense account,
which is a liability because it represents an obligation which will need to
be paid in the future. Remember accrued expenses are NOT expenses.
⩥ Accrued Liability. Answer: Liability accounts that record expenses
that have been recognized on the income statement but have not yet been
paid. Similar to accrued expenses.
⩥ Accrued Payroll. Answer: An accrued expense recorded at the end of a
financial period for amounts of payroll that have been worked but not
yet paid. It is a common type of accrued expense. See also
Salaries/Wages Payable.
, ⩥ Accrued Revenue. Answer: An asset account that records revenue that
has been earned and recognized on the income statement but not yet paid
for by the customer. At the time of the accrual, we debit the receivable
account and credit the appropriate accrued revenue account. When the
cash transfer ultimately occurs, we debit the cash account and credit the
receivable account.
⩥ Accumulated Depreciation. Answer: A contra asset account that
includes the cumulative total of all depreciation expenses recorded to
date for specific assets. The credit balance in this account offsets the
debit balance in the asset account which shows the original value of the
asset. When the original asset value is netted against the accumulated
depreciation for the asset you arrive at the net book value of the asset.
⩥ Accumulated other comprehensive income. Answer: An equity
account that consists of cumulative unrealized gains or losses on line
items classified under other comprehensive income. It includes items
such as unrealized gains or losses on investments available for sale,
foreign currency gains or losses, and pension plan gains or losses.
⩥ Adjusting (Journal) Entries. Answer: Entries made to adjust the
balances of asset and liability accounts to reflect changes in their values
due to the passage of time or another implicit transaction.
⩥ Allowance for Doubtful Accounts. Answer: A contra asset account
that nets against Accounts Receivable. It is generally set up as an
estimate of accounts that will ultimately prove to be uncollectible. It is
