MGT 8803 Financial Accounting questions with complete solutions

MGT 8803 Financial Accounting questions with
complete solutions


Proprietorship - answer-A form of business organization with one owner who takes all
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the risks and all the profits. Unlimited liability, but the business doesn't pay taxes.
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Partnership - answer-A business owned by two or more people who share its risks and
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rewards. Unlimited liability, but the business doesn't pay taxes.
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Corporation - answer-A business owned by stockholders who share in its profits but are
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not personally responsible for its debts. Double taxation.
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Going Concern Assumption - answer-The assumption that the company will continue in
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operation for the foreseeable future.
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Periodicity Assumption - answer-An assumption that the life of a business can be divided
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into artificial time periods and that useful reports covering those periods can be
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prepared for the business.
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Materiality Assumption - answer-The only information that needs to be disclosed in
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financial statements is that which will be useful for those who use the financial
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statements to make decisions.
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GAAP - answer-Generally Accepted Accounting Principles. The standards and rules that
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accountants follow while recording and reporting financial activities.
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SEC - answer-Securities and Exchange Commission
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FASB - answer-Financial Accounting Standards Board, is the private sector body given
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the primary responsibility to work out the detailed rules that become GAAP.
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IFRS - answer-International Financial Reporting Standards. Opposition from US
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vcompanies to convert to this. v v v v




GAAP vs. Tax Accounting - answer-Tax accounting focuses on IRS reporting.
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Qualities of Financial Statements - answer-Understandability, timeliness, full disclosure,
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comparability (over time and with other companies), objectivity (accuracy not applicable
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because judgement needed), decision relevance.
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Three Required Financial Statements - answer-1. Balance Sheet
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2. Income Statement
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