HFMA CHFP COURSE 2: FINANCIAL ACCOUNTING CONCEPTS
EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED
Double entry system
with this type of bookkeeping, each accounting transaction has two sides that are equal
or "in balance".
Asset
_____ is what you have or are owed.
Liability
_______ is what you owe.
Net assets or equity
______ is what you get to keep.
Accounting equation
Assets = (Liabilities + Net Assets) [for a not-for-profit entity] or
Assets = (Liabilities + Equity) [for a for-profit entity). Sometimes also referred to as the
accounting identity.
The Matching Principle
Revenues earned in a given period (month, quarter, year) must be matched with the
corresponding expenses incurred in earning that revenue.
Accrual
Is an accounting entry that records an asset (receivable) for a service (revenue)
rendered but for which payment has not been collected and a liability (a payable) for a
matching cost (expense) incurred but not yet paid. ______ basis accounting (an
accounting system that uses accruals) is required by Generally Accepted Accounting
Principles (GAAP) of all but the smallest business entities.
Cash basis accounting
___________ is the alternative to accrual basis accounting. It does not follow the
matching principle. Under cash basis accounting,
Revenue = Cash receipts and Expenses = Cash disbursements.
Income Statement or "Statement of Activities"
_______________ summarizes revenues, expenses, and income for an organization
over a specified period of time (month, quarter, year). The _____ ties to the balance
sheet through net assets: Net assets at beginning of the period (the previous balance
sheet date) + Net income during the period = Net assets at the end of the period (the
current balance sheet date).
Balance Sheet or "Statement of Financial Position"
The _____ describes the organization's assets, liabilities, and net assets at a specified
point in time - usually the end of the accounting period (month, quarter, year).
Statement of Cash Flows
The _____ shows the sources and uses of cash using the accrual basis of accounting.
This statement reconciles the change in the cash balance during the period to net
income during the period. The statement breaks down _______ into operating, investing
and financing activities.
Liquidity
EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS VERIFIED
Double entry system
with this type of bookkeeping, each accounting transaction has two sides that are equal
or "in balance".
Asset
_____ is what you have or are owed.
Liability
_______ is what you owe.
Net assets or equity
______ is what you get to keep.
Accounting equation
Assets = (Liabilities + Net Assets) [for a not-for-profit entity] or
Assets = (Liabilities + Equity) [for a for-profit entity). Sometimes also referred to as the
accounting identity.
The Matching Principle
Revenues earned in a given period (month, quarter, year) must be matched with the
corresponding expenses incurred in earning that revenue.
Accrual
Is an accounting entry that records an asset (receivable) for a service (revenue)
rendered but for which payment has not been collected and a liability (a payable) for a
matching cost (expense) incurred but not yet paid. ______ basis accounting (an
accounting system that uses accruals) is required by Generally Accepted Accounting
Principles (GAAP) of all but the smallest business entities.
Cash basis accounting
___________ is the alternative to accrual basis accounting. It does not follow the
matching principle. Under cash basis accounting,
Revenue = Cash receipts and Expenses = Cash disbursements.
Income Statement or "Statement of Activities"
_______________ summarizes revenues, expenses, and income for an organization
over a specified period of time (month, quarter, year). The _____ ties to the balance
sheet through net assets: Net assets at beginning of the period (the previous balance
sheet date) + Net income during the period = Net assets at the end of the period (the
current balance sheet date).
Balance Sheet or "Statement of Financial Position"
The _____ describes the organization's assets, liabilities, and net assets at a specified
point in time - usually the end of the accounting period (month, quarter, year).
Statement of Cash Flows
The _____ shows the sources and uses of cash using the accrual basis of accounting.
This statement reconciles the change in the cash balance during the period to net
income during the period. The statement breaks down _______ into operating, investing
and financing activities.
Liquidity
