Major Field Test Business Study Set Questions and Correct Answers Latest Update 2024-2025 Already
Passed
Balance Sheet - Answers Attempts to describe the financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting liabilities from assets..
Income Statement - Answers Presents the results of the operations of an entity over a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings (Capital) - Answers Bridges the gap between the
income statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to owners
Statement of Cash Flows - Answers Provides information about a company's cash receipts and cash
payments during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities, equity, net income, income, gains,
losses, Statement of 'X' Equity, Investments by Owners, Distributions to Owners.
Cash Basis Accounting - Answers Revenue is recognized in the accounting period in which the associated
cash is received and Expenses are recognized in the accounting period that the cash is paid.
Accrual Basis Accounting - Answers Revenue is recognized in the accounting period in which the revenue
is earned, regardless of when the associated revenue is received. (Recorded when the sale is made, not
when it is paid for.)
Depreciation - Answers A method of allocating the cost of a tangible asset over its useful life. Businesses
depreciate long-term assets for both tax and accounting purposes.
Straight-Line Deprecation - Answers Straight Line Depreciation - (estimated value/useful life)
,Equal amounts of depreciation expense are recorded in each period of the useful life of the asset, if not
disposed of prior to the end of estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation - Answers Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in the early periods of useful life and
less in the later periods.)
Basic Inventory Equation for Goods - Answers Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) - Answers Goods Available for Sale - Ending
Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - Answers Beginning Inventory + Purchases = Goods
Available for Sale - Cost of Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting - Answers No transactions are recorded in the inventory account until the
end of the accounting period. Merchandise purchases are recorded in a purchases account.
Inventory is counted and costed at the end of each accounting period. The inventory account beginning
balance is adjusted to physical inventory amount and the difference is added to or subtracted from
periodic Cost of Goods Sold.
Perpetual Inventory Accounting - Answers Merchandise purchases are added to the inventory account
when the merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory account as sales are recorded.
FIFO (Inventory) - Answers Inventory Oldest items inventory are sold first .(Example: Fruit)
LIFO (Inventory) - Answers Most recent items added to inventory are sold first. (Example: Ore from
Mining)
Average Cost (Inventory) - Answers Ending inventory units are costed using an average cost of goods
available divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) - Answers Inventory items are tagged with their cost. (Example:
automobiles)
Generally Accepted Accounting Principles (GAAP) - Answers A framework of accounting standards, rules
and procedures defined by the professional accounting industry, which has been adopted by nearly all
publicly traded U.S. companies.
, Securities Act of 1935 - Answers Established the SEC Securities and Exchange Commission with the
explicit authority to establish the rules, standards, and procedures used to account for transactions and
events. Also to establish the form and content of published financial reporting.
Management Accounting - Answers Concerned with identification, measurement, accumulation,
analysis, preparation, interpretation, and communication of financial information used my management
to plan and evaluate and control within an organization to assure appropriate use of and accountability
of resources.
Cost Accounting - Answers Concerned only with the cost of a product or service.
Product Costs - Answers Cost of the various products manufactured and sold by a company. (Examples:
Inventory Costs or Cost of Prodcution
Period Cost - Answers ll costs incurred by a company that are not considered product costs. (Examples:
Administration Expenses or Selling Expenses)
Direct Costs - Answers A cost that is easily traceable to the cost object and is a result solely of the cost
object. (Example: Lye used to make bars of soap.)
Indirect Cost - Answers A cost that supports more than one cost objects, and must be "allocated" to
those various cost objects (Example: Electricity used at a plant.)
Direct Material - Answers Cost of materials used in production. (Examples: sheet metal, tires, fabric, etc.)
Direct Labor - Answers Cost of Labor used in production. (Example: assembly line workers)
Manufacturing Overhead - Answers Indirect factory-related costs that are incurred when a product is
manufactured. (Examples: facility costs, indirect labor, machine set up costs, quality control, etc.)
Variable Costs - Answers Expenses that vary directly with changes in activity or changes in volume.
Fixed Cost - Answers Expenses that do not change as a function of the activity of a business, within the
relevant period. (Examples: Rent, Utilities, etc.)
Adam Smith - Answers Father of Economics
Responsible for Division of Labor 1776:
Tasks are subdivided into individual jobs
Employees perform only the tasks relevant to their specialized function
Jobs tend to be small, but they can be performed efficiently
Passed
Balance Sheet - Answers Attempts to describe the financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting liabilities from assets..
Income Statement - Answers Presents the results of the operations of an entity over a peroid of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings (Capital) - Answers Bridges the gap between the
income statement and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to owners
Statement of Cash Flows - Answers Provides information about a company's cash receipts and cash
payments during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities, equity, net income, income, gains,
losses, Statement of 'X' Equity, Investments by Owners, Distributions to Owners.
Cash Basis Accounting - Answers Revenue is recognized in the accounting period in which the associated
cash is received and Expenses are recognized in the accounting period that the cash is paid.
Accrual Basis Accounting - Answers Revenue is recognized in the accounting period in which the revenue
is earned, regardless of when the associated revenue is received. (Recorded when the sale is made, not
when it is paid for.)
Depreciation - Answers A method of allocating the cost of a tangible asset over its useful life. Businesses
depreciate long-term assets for both tax and accounting purposes.
Straight-Line Deprecation - Answers Straight Line Depreciation - (estimated value/useful life)
,Equal amounts of depreciation expense are recorded in each period of the useful life of the asset, if not
disposed of prior to the end of estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation - Answers Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in the early periods of useful life and
less in the later periods.)
Basic Inventory Equation for Goods - Answers Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) - Answers Goods Available for Sale - Ending
Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory - Answers Beginning Inventory + Purchases = Goods
Available for Sale - Cost of Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting - Answers No transactions are recorded in the inventory account until the
end of the accounting period. Merchandise purchases are recorded in a purchases account.
Inventory is counted and costed at the end of each accounting period. The inventory account beginning
balance is adjusted to physical inventory amount and the difference is added to or subtracted from
periodic Cost of Goods Sold.
Perpetual Inventory Accounting - Answers Merchandise purchases are added to the inventory account
when the merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory account as sales are recorded.
FIFO (Inventory) - Answers Inventory Oldest items inventory are sold first .(Example: Fruit)
LIFO (Inventory) - Answers Most recent items added to inventory are sold first. (Example: Ore from
Mining)
Average Cost (Inventory) - Answers Ending inventory units are costed using an average cost of goods
available divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) - Answers Inventory items are tagged with their cost. (Example:
automobiles)
Generally Accepted Accounting Principles (GAAP) - Answers A framework of accounting standards, rules
and procedures defined by the professional accounting industry, which has been adopted by nearly all
publicly traded U.S. companies.
, Securities Act of 1935 - Answers Established the SEC Securities and Exchange Commission with the
explicit authority to establish the rules, standards, and procedures used to account for transactions and
events. Also to establish the form and content of published financial reporting.
Management Accounting - Answers Concerned with identification, measurement, accumulation,
analysis, preparation, interpretation, and communication of financial information used my management
to plan and evaluate and control within an organization to assure appropriate use of and accountability
of resources.
Cost Accounting - Answers Concerned only with the cost of a product or service.
Product Costs - Answers Cost of the various products manufactured and sold by a company. (Examples:
Inventory Costs or Cost of Prodcution
Period Cost - Answers ll costs incurred by a company that are not considered product costs. (Examples:
Administration Expenses or Selling Expenses)
Direct Costs - Answers A cost that is easily traceable to the cost object and is a result solely of the cost
object. (Example: Lye used to make bars of soap.)
Indirect Cost - Answers A cost that supports more than one cost objects, and must be "allocated" to
those various cost objects (Example: Electricity used at a plant.)
Direct Material - Answers Cost of materials used in production. (Examples: sheet metal, tires, fabric, etc.)
Direct Labor - Answers Cost of Labor used in production. (Example: assembly line workers)
Manufacturing Overhead - Answers Indirect factory-related costs that are incurred when a product is
manufactured. (Examples: facility costs, indirect labor, machine set up costs, quality control, etc.)
Variable Costs - Answers Expenses that vary directly with changes in activity or changes in volume.
Fixed Cost - Answers Expenses that do not change as a function of the activity of a business, within the
relevant period. (Examples: Rent, Utilities, etc.)
Adam Smith - Answers Father of Economics
Responsible for Division of Labor 1776:
Tasks are subdivided into individual jobs
Employees perform only the tasks relevant to their specialized function
Jobs tend to be small, but they can be performed efficiently
