HSM 340 Week 2 Quiz (GRADED A) Questions and Answers | 100% Correct solutions

1. Question : (TCO 2) A statement that reports the financial position (assets, liabilities, and stockholders' equity) of an accounting entity at a point in time is called a(an): Student Answer: Income statement Statement of retained earnings Balance sheet Statement of cash flows Report of management Instructor Explanation: Chapter 9 Question 2. Question : (TCO 2) Which method(s) of financial reporting does (do) not recognize the impact of changes in unrealized gains in replacement value? Student Answer: HC and HC-GPL CV and CV-GPL HC and CV HC-GPL and CV-GPL Instructor Explanation: Chapter 10 0 - MultipleChoice 6 Question 3. Question : (TCO 2) The is a way for organizations to improve the collection and communication of financial and operating information. Student Answer: Performance dashboard Financial bottom-line Holistic perspective Performance perspective Instructor Explanation: Chapter 11 Question 4. Question : (TCO 2) What is/(are) the primary determinant(s) of firm value? Student Answer: Profit Investment Cost of capital All of above Instructor Explanation: Chapter 11 0 - MultipleChoice 12 Question 5. Question : (TCO 2) What are the major reasons for accrual accounting? Student Answer: The major reasons for accrual accounting is to maintain consistency, comparability, relevance, and reliability within your business. Instructor Explanation: The major reasons for the accrual basis of accounting are to: • Match revenues and expenses • Avoid management manipulation of cash flows to influence the financial statements • Keep track of resource flows as well as cash flows 0 - Short 2 Question 6. Question : (TCO 2) What are the double-entry accounting system and the duality concept? How are they related? Student Answer: Double Entry is a record keeping system under which every transaction is recorded in at least two accounts. There is no limit on the number of accounts that may be used in a transaction, but the minimum is two accounts. The duality concept is an accounting principle that recognizes the dual impact of business transactions on the cash flow ledger or the balance sheet. The fundamental concept underlying present-day bookkeeping and accounting. Double entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. It is used to satisfy the equation Assets = Liabilities + Equity, whereby each entry is recorded so as to maintain the relationship. INVESTOPEDIA EXPLAINS 'Double Entry' In the double entry system, transactions are recorded in terms of debits and credits. Since a debit in one account will be offset by a credit in another account, the sum of all debits must Instructor Explanation: therefore be exactly equal to the sum of all credits. The double- entry system of bookkeeping or accounting makes it easier to accurately prepare financial statements directly from the books of account and detect errors. They are related because the duality concept is the underlying basis for double entry accounting system. The double-entry accounting system has evolved from the duality concept. Every transaction affects at least two accounts (duality of effects). The double-entry accounting refers to the fact that each business transaction has affected at least two different accounts (again, the duality concept). A journal entry will be made with at least one account being debited and at least one account being credited. 0 - Short 5 Question 7. Question : (TCO 2) The HC method, which uses unadjusted historical costs, does not take into account depreciation expenses, purchasing power, and unrealized gains in replacement value. Despite these weaknesses as a financial reporting method, the HC method is used more frequently for accounting purposes than other methods, such as the HC-GPL, CV, and CV-GPL methods. Why is this so? Student Answer: The reason HC is most frequently used is because of the simplicity and certainty of the method. Most organizations know what they have paid for the assets when they purchased them and they also know what proceeds they receive in exchange for their obligations. The HC method is a very objective method because usually subjective methods are not involved. Instructor Explanation: The HC method of reporting is regarded by many as the most objective method of accounting and is consistent with the accounting principles of cost valuation. It is and has been widely used and is therefore widely understood by many. Periods of rapid inflation or deflation can however violate the accounting principle of a stable monetary unit. 0 - Short 9 Question 8. Question : (TCO 2) Define and describe the purpose of fund accounting (now called net assets). Student Answer: Fund Accounting is a system of accounting used primarily by non- profit, government organizations or other similar organizations to keep a record of how their money was spent, rather than how it was earned, unlike corporations. Their accounting records take the form of a collection of funds, each fund having a distinct purpose ranging from operating expenses to funding the various activities of the organization. The purpose of fund accounting is to properly account for all resources received and used. Instructor Explanation: Fund accounting is a system of accounting in which economic resources and related obligations of an organization are separated in the accounting records into funds. Funds are used to recognize the specific purposes to which certain resources are restricted. Show Less