3 Keys to a Successful Business - CORRECT ANSWERS-Idea,
Capital, Management Skill
Types of Businesses - CORRECT ANSWERS-Manufacturing,
Merchandising, Retail, Wholesale, Service
2 Ways to access Capital - CORRECT ANSWERS-Borrowing (Debt),
Investing (Ownership, Equity)
4 General Purpose Financial Statements - CORRECT ANSWERS-
Balance Sheet, Income Statement, Statement of Cash Flows,
Statement of retained Earnings (Optional)
GAAP - CORRECT ANSWERS-Generally Accepted Accounting
Principles. Rules and standards for accounting that help accounting
statements be comparable.
SEC - CORRECT ANSWERS-Securities Exchange Commission. In
charge of delegating who determines GAAP.
AICPA - CORRECT ANSWERS-American Institute of Certified Public
Accountants. Originally in charge of setting GAAP. Now in charge of
setting and licensing CPAs.
FASB - CORRECT ANSWERS-Financial Accounting Standards
Board. In charge of determining GAAP today.
IRS - CORRECT ANSWERS-Internal Revenue Service. Collects
income taxes from businesses.
CPA - CORRECT ANSWERS-Certified Personal Accountant. In
charge of performing audits on publicly held companies to insure
credibility.
3 Legal Business Forms - CORRECT ANSWERS-Proprietorship (sole
owner), Partnership (several owners), Corporation (Many owners,
board of directors, avoids liability)
,Accounting Final Exam 2024
Basic Accounting Equation - CORRECT ANSWERS-Assets =
Liabilities + Owner's Equity, Owner's Equity = Capital Stock +
Retained Earnings, Retained Earnings = Net Income - Dividends, Net
Income = Revenue - Expenses.
EPS - CORRECT ANSWERS-Earnings Per Share, required on the
income statement by GAAP.
Current - CORRECT ANSWERS-Assets or liabilities that will be paid
or used up with in a year.
Objective Vs. Subjective - CORRECT ANSWERS-Objective (not
opinion based), Subjective (Opinion based) GAAP requires that asset
valuation be Objective.
Historical Cost Principle - CORRECT ANSWERS-Assets are valued at
their purchase cost (the FMV at the time). CPA's usually undervalue
Assets. The exception is if there is credible evidence that the asset's
market value is below its Historical Cost.
Entity Concept - CORRECT ANSWERS-CPAs will only value assets
owned by the business, not the owners.
Debit vs. Credit - CORRECT ANSWERS-Increases to Dividends,
Expenses, and Assets will be shown in the debit column. Increases to
Liabilities, Revenues, or Capital Stock will be shown in the credit
Column. Decreases will be shown in the opposite column.
General Ledger - CORRECT ANSWERS-A file or book of accounts
that has separate records for each kind of asset, liability, or owner's
equity.
Trial Balance - CORRECT ANSWERS-Used in a manual Accounting
system, the totals of each of the accounts are put in either the CR or
,DR columns for the entire period. The CR and DR columns should
equal each other. This form can help us create the financial
statements.
Steps of the accounting System - CORRECT ANSWERS-1. Identify,
2. Analyze, 3. Record, 4. Summarize, 5. Trial Balance (Only in a
manual System), 6. Create Financial Statements, 7. Journalize and
post to general ledger, make closing entries and adjusting entries
Revenue Recognition Principle - CORRECT ANSWERS-Revenues
are to be recognized in the period in which they are earned and not
necessarily when the cash is received.
Matching Principle - CORRECT ANSWERS-Expenses are to be
recognized in the period in which they provide benefit to the business,
not when the cash is paid.
Prepaid Expenses - CORRECT ANSWERS-Asset, should be adjusted
at the end of the period for the amount used.
Unearned Revenue - CORRECT ANSWERS-Liability, should be
adjusted at the end of the period for the amount used up in the period.
Closing Entries - CORRECT ANSWERS-Revenues, Expenses, and
Dividends close to Retained Earnings.
Perpetual Inventory Account - CORRECT ANSWERS-Accounting for
inventory at the time of an inflow or outflow of inventory so that it will
show the amount of inventory at any given time.
Computerized inventory systems are great for - CORRECT
ANSWERS-Managing seasonal inventories like (valentines day
cards), helps us understand trends, finding relationships of purchasing
between different products.
Accounting for Returns of Inventory to the supplier - CORRECT
ANSWERS-If we return something to the supplier, we credit inventory
, and debit accounts payable. If there is a return before we pay off the
inventory we bought from the supplier on a discount. We may put
1900 in accounts payable but get a 2% discount and pay them 1862.
In this case we would also discount inventory by 38 because the
inventory was actually less expensive than we thought.
Specific Identification - CORRECT ANSWERS-The cost of goods sold
and inventory at the sale of a good has to be specific to the price we
paid for that item of inventory.
Equal Inventory Bought at different Prices - CORRECT ANSWERS-If
we buy jelly beans that are identical but at two different prices on two
different days, what is the cost of goods sold. If it is all sold it would
not matter which method you account for cost of goods sold.
LIFO - CORRECT ANSWERS-Last inventory in, first inventory out for
accounting for cost of goods sold.
FIFO - CORRECT ANSWERS-First in, first out for accounting for cost
of goods sold.
MWA - CORRECT ANSWERS-(Moving Weighted Average) Average
cost of all of the inventory for accounting for cost of goods sold. Can
be solved as TOTAL COST/Total units. If more is purchased the old
amount is multiplied by the original average and a new average is
created.
GAAP requirements for COGS - CORRECT ANSWERS-GAAP allows
LIFO, FIFO or MWA, but which ever method is chosen must be used
consistently. They can put the other method in the footnotes for
investors if they want to.
IRS rule around cost of goods sold method - CORRECT ANSWERS-
FIFO and LIFO usually have opposite purposes. One will look good for
investors, one will reduce the cost for IRS, but IRS requires we use
the same method for all reporting.
Capital, Management Skill
Types of Businesses - CORRECT ANSWERS-Manufacturing,
Merchandising, Retail, Wholesale, Service
2 Ways to access Capital - CORRECT ANSWERS-Borrowing (Debt),
Investing (Ownership, Equity)
4 General Purpose Financial Statements - CORRECT ANSWERS-
Balance Sheet, Income Statement, Statement of Cash Flows,
Statement of retained Earnings (Optional)
GAAP - CORRECT ANSWERS-Generally Accepted Accounting
Principles. Rules and standards for accounting that help accounting
statements be comparable.
SEC - CORRECT ANSWERS-Securities Exchange Commission. In
charge of delegating who determines GAAP.
AICPA - CORRECT ANSWERS-American Institute of Certified Public
Accountants. Originally in charge of setting GAAP. Now in charge of
setting and licensing CPAs.
FASB - CORRECT ANSWERS-Financial Accounting Standards
Board. In charge of determining GAAP today.
IRS - CORRECT ANSWERS-Internal Revenue Service. Collects
income taxes from businesses.
CPA - CORRECT ANSWERS-Certified Personal Accountant. In
charge of performing audits on publicly held companies to insure
credibility.
3 Legal Business Forms - CORRECT ANSWERS-Proprietorship (sole
owner), Partnership (several owners), Corporation (Many owners,
board of directors, avoids liability)
,Accounting Final Exam 2024
Basic Accounting Equation - CORRECT ANSWERS-Assets =
Liabilities + Owner's Equity, Owner's Equity = Capital Stock +
Retained Earnings, Retained Earnings = Net Income - Dividends, Net
Income = Revenue - Expenses.
EPS - CORRECT ANSWERS-Earnings Per Share, required on the
income statement by GAAP.
Current - CORRECT ANSWERS-Assets or liabilities that will be paid
or used up with in a year.
Objective Vs. Subjective - CORRECT ANSWERS-Objective (not
opinion based), Subjective (Opinion based) GAAP requires that asset
valuation be Objective.
Historical Cost Principle - CORRECT ANSWERS-Assets are valued at
their purchase cost (the FMV at the time). CPA's usually undervalue
Assets. The exception is if there is credible evidence that the asset's
market value is below its Historical Cost.
Entity Concept - CORRECT ANSWERS-CPAs will only value assets
owned by the business, not the owners.
Debit vs. Credit - CORRECT ANSWERS-Increases to Dividends,
Expenses, and Assets will be shown in the debit column. Increases to
Liabilities, Revenues, or Capital Stock will be shown in the credit
Column. Decreases will be shown in the opposite column.
General Ledger - CORRECT ANSWERS-A file or book of accounts
that has separate records for each kind of asset, liability, or owner's
equity.
Trial Balance - CORRECT ANSWERS-Used in a manual Accounting
system, the totals of each of the accounts are put in either the CR or
,DR columns for the entire period. The CR and DR columns should
equal each other. This form can help us create the financial
statements.
Steps of the accounting System - CORRECT ANSWERS-1. Identify,
2. Analyze, 3. Record, 4. Summarize, 5. Trial Balance (Only in a
manual System), 6. Create Financial Statements, 7. Journalize and
post to general ledger, make closing entries and adjusting entries
Revenue Recognition Principle - CORRECT ANSWERS-Revenues
are to be recognized in the period in which they are earned and not
necessarily when the cash is received.
Matching Principle - CORRECT ANSWERS-Expenses are to be
recognized in the period in which they provide benefit to the business,
not when the cash is paid.
Prepaid Expenses - CORRECT ANSWERS-Asset, should be adjusted
at the end of the period for the amount used.
Unearned Revenue - CORRECT ANSWERS-Liability, should be
adjusted at the end of the period for the amount used up in the period.
Closing Entries - CORRECT ANSWERS-Revenues, Expenses, and
Dividends close to Retained Earnings.
Perpetual Inventory Account - CORRECT ANSWERS-Accounting for
inventory at the time of an inflow or outflow of inventory so that it will
show the amount of inventory at any given time.
Computerized inventory systems are great for - CORRECT
ANSWERS-Managing seasonal inventories like (valentines day
cards), helps us understand trends, finding relationships of purchasing
between different products.
Accounting for Returns of Inventory to the supplier - CORRECT
ANSWERS-If we return something to the supplier, we credit inventory
, and debit accounts payable. If there is a return before we pay off the
inventory we bought from the supplier on a discount. We may put
1900 in accounts payable but get a 2% discount and pay them 1862.
In this case we would also discount inventory by 38 because the
inventory was actually less expensive than we thought.
Specific Identification - CORRECT ANSWERS-The cost of goods sold
and inventory at the sale of a good has to be specific to the price we
paid for that item of inventory.
Equal Inventory Bought at different Prices - CORRECT ANSWERS-If
we buy jelly beans that are identical but at two different prices on two
different days, what is the cost of goods sold. If it is all sold it would
not matter which method you account for cost of goods sold.
LIFO - CORRECT ANSWERS-Last inventory in, first inventory out for
accounting for cost of goods sold.
FIFO - CORRECT ANSWERS-First in, first out for accounting for cost
of goods sold.
MWA - CORRECT ANSWERS-(Moving Weighted Average) Average
cost of all of the inventory for accounting for cost of goods sold. Can
be solved as TOTAL COST/Total units. If more is purchased the old
amount is multiplied by the original average and a new average is
created.
GAAP requirements for COGS - CORRECT ANSWERS-GAAP allows
LIFO, FIFO or MWA, but which ever method is chosen must be used
consistently. They can put the other method in the footnotes for
investors if they want to.
IRS rule around cost of goods sold method - CORRECT ANSWERS-
FIFO and LIFO usually have opposite purposes. One will look good for
investors, one will reduce the cost for IRS, but IRS requires we use
the same method for all reporting.
