MGT 8803 Financial Accounting | Questions with 100 % Correct Answers | Verified

MGT 8803 Financial Accounting

Periodicity - CORRECT ANSWER: Presume that we can arbitrarily pick any time period
that we want to and report the financial results for that time period

Materiality - CORRECT ANSWER: Only information that would influence the decisions
of a reasonable person need be disclosed

Users of Financial Reports - CORRECT ANSWER: Investors (Stockholders), Creditors
(Banks), Government agencies (SEC), Company management, financial analysts

GAAP - CORRECT ANSWER: Generally Accepted Accounting Principles. The standards
and rules that accountants follow while recording and reporting financial activities.

SEC - CORRECT ANSWER: Securities and Exchange Commission; rule making resides
under their authority

IFRS - CORRECT ANSWER: International Financial Reporting Standards

GAAP vs Tax accounting - CORRECT ANSWER: Tax accounting is done for the IRS

Qualities of Financial Statements - CORRECT ANSWER: Understandability, timeliness,
full disclosure, comparability, objectivity, decision relevance

Balance sheet - CORRECT ANSWER: Measures financial position at a point in time;
Assets = Liabilities + Owners Equity

Accounting equation - CORRECT ANSWER: Assets = Liabilities + Owner's Equity

Assets - CORRECT ANSWER: Resources of the company; resources owned or rights to
receive resources

Proprietorship - CORRECT ANSWER: Single Owner; unlimited liability & no taxation

Partnership - CORRECT ANSWER: More than one owner; unlimited liability & no
taxation

Corporation - CORRECT ANSWER: A business owned by stockholders (shareholders ->
board of directors --> top managers); limited liability & taxation

, Assumptions of Financial Accounting - CORRECT ANSWER: Separate entity, unit of
measurement, going concern, periodicity, materiality

Going Concern - CORRECT ANSWER: Presume that the company will continue to
operate & that it will be ongoing



Liabilities - CORRECT ANSWER: Sources of funding provided by the creditors; creditors
claims

Owners' Equity - CORRECT ANSWER: Sources provided by the owners; owner's claims

Liquidity - CORRECT ANSWER: The closer they are to being cash, the more liquid they
are

Cost Principle - CORRECT ANSWER: Assets are valued at their historical cost

Current vs Long Term Assets - CORRECT ANSWER: Conversion to cash within 1 year

Current vs Long Term Liabilities - CORRECT ANSWER: Due date within 1 year

Capital Stock - CORRECT ANSWER: What the company received when selling shares of
stock

Retained Earning - CORRECT ANSWER: beg RE + NI - Dividends

Dividends - CORRECT ANSWER: Distribution of earnings, and only occurs when the
Board of Directors decides to distribute the earnings

Statement of Stockholders' Equity - CORRECT ANSWER: Beg SE + NI - dividends +
Issuance of Capital Stock

Cash Basis Accounting - CORRECT ANSWER: Revenues will be recognized when cash is
received, and expenses are recognized when cash is paid out

Income Statement - CORRECT ANSWER: Uses Accrual Accounting; Shows the results of
a company's operations (success) over a period of time

Revenue Recognition Principle - CORRECT ANSWER: Revenue is recognized when
earned; earning process is considered to be complete even though cash has not yet been
collected

Matching Principle - CORRECT ANSWER: Costs are reported as expenses in the same
time period as their related revenues