ACG 2021 EXAM 1: CHAPTERS 1, 2, & 3 | 100% VERIFIED EXAM
QUESTIONS & ANSWERS | LATEST 2026/2027 VERSION
1. What is the purpose of Financial Accounting? ANSWER To measure
business activities of a company and communicate that information to
external parties for decision-making purposes
2. Who are Auditors? ANSWER trained individuals hired by a company
as an independent party to express a professional opinion of the accuracy
of that company's financial statements
3. What is Accrual-basis Accounting? ANSWER record revenue when we
earn them and record expenses with related expenses, regardless of when
cash is received or paid
4. What is Cash-basis Accounting? ANSWER record revenues at the time
cash received and expenses at the time cash is paid.
5. What is GAAP? ANSWER Generally Accepted Accounting Principles:
the rules of financial accounting
6. What is the Revenue Recognition Principal? ANSWER record revenue
in the period in which we earn it
7. What is the Matching Principal? ANSWER recognizing expenses in the
same period as the revenues they help generate
8. What is the Accounting Equation? ANSWER A = L + SE A company's
assets = that company's liabilities and stock-holders' equity
9. What are Assets? ANSWER resources owned by a company
(cash, land, equipment, accounts receivable...)
10. What are Liabilities? ANSWER amounts owed to creditors
(accounts payable, notes payable)
11. What is Stockholders' Equity? ANSWER owners' claims to resources
(common stock, retained earnings)
12. What are Revenues? ANSWER the amounts earned from selling
products or services to customers
, 13. What are Expenses? ANSWER the costs of providing products and
services
14. What is Net Income? ANSWER the difference between revenues and
expenses
15. What is an Account? ANSWER summary of the effects of all
transactions related to a particular item over a period of time.
16. What is a Chart of Accounts? ANSWER a list of all account names
used to record transactions of a company.
17. What is the Operating Cycle? ANSWER the average time between
purchasing or acquiring inventory and receiving cash proceeds from its
sale.
18. What is the General Ledger? ANSWER all accounts used to record the
company's transactions
19. What is a Journal? ANSWER a chronological record of all the
transactions affecting a firm
20. What is Posting? ANSWER the process of transferring the debit and
credit informations from the journal to individual accounts in the general
ledger
21. What is a Trial Balance? ANSWER a list of all accounts and their
balances at a particular date, showing the total debits and credits
22. What are Adjusting Entries? ANSWER to record events that have
occurred but that have not been recorded, such as recording insurance
expense at the end of the month from a prepaid policy
23. What is an Adjusted Trial Balance? ANSWER list of all accounts and
their balances after we have updated account balances for adjusting
entries.
24. What are Financial Statements? ANSWER periodic reports published
by the company for the purpose of providing interval of time to external
parties
25. What is an Income Statement? ANSWER Revenues + Expenses = Net
Income
(financial statement that reports the company's revenues and expenses
over an interval of time)
QUESTIONS & ANSWERS | LATEST 2026/2027 VERSION
1. What is the purpose of Financial Accounting? ANSWER To measure
business activities of a company and communicate that information to
external parties for decision-making purposes
2. Who are Auditors? ANSWER trained individuals hired by a company
as an independent party to express a professional opinion of the accuracy
of that company's financial statements
3. What is Accrual-basis Accounting? ANSWER record revenue when we
earn them and record expenses with related expenses, regardless of when
cash is received or paid
4. What is Cash-basis Accounting? ANSWER record revenues at the time
cash received and expenses at the time cash is paid.
5. What is GAAP? ANSWER Generally Accepted Accounting Principles:
the rules of financial accounting
6. What is the Revenue Recognition Principal? ANSWER record revenue
in the period in which we earn it
7. What is the Matching Principal? ANSWER recognizing expenses in the
same period as the revenues they help generate
8. What is the Accounting Equation? ANSWER A = L + SE A company's
assets = that company's liabilities and stock-holders' equity
9. What are Assets? ANSWER resources owned by a company
(cash, land, equipment, accounts receivable...)
10. What are Liabilities? ANSWER amounts owed to creditors
(accounts payable, notes payable)
11. What is Stockholders' Equity? ANSWER owners' claims to resources
(common stock, retained earnings)
12. What are Revenues? ANSWER the amounts earned from selling
products or services to customers
, 13. What are Expenses? ANSWER the costs of providing products and
services
14. What is Net Income? ANSWER the difference between revenues and
expenses
15. What is an Account? ANSWER summary of the effects of all
transactions related to a particular item over a period of time.
16. What is a Chart of Accounts? ANSWER a list of all account names
used to record transactions of a company.
17. What is the Operating Cycle? ANSWER the average time between
purchasing or acquiring inventory and receiving cash proceeds from its
sale.
18. What is the General Ledger? ANSWER all accounts used to record the
company's transactions
19. What is a Journal? ANSWER a chronological record of all the
transactions affecting a firm
20. What is Posting? ANSWER the process of transferring the debit and
credit informations from the journal to individual accounts in the general
ledger
21. What is a Trial Balance? ANSWER a list of all accounts and their
balances at a particular date, showing the total debits and credits
22. What are Adjusting Entries? ANSWER to record events that have
occurred but that have not been recorded, such as recording insurance
expense at the end of the month from a prepaid policy
23. What is an Adjusted Trial Balance? ANSWER list of all accounts and
their balances after we have updated account balances for adjusting
entries.
24. What are Financial Statements? ANSWER periodic reports published
by the company for the purpose of providing interval of time to external
parties
25. What is an Income Statement? ANSWER Revenues + Expenses = Net
Income
(financial statement that reports the company's revenues and expenses
over an interval of time)
