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ACCOUNTING CRASH
COURSE QUESTIONS AND ANSWERS
2025
Accounting is important for - correct answer- firm's officers,
investors, lenders, and the general public
Generally Accepted Accounting Principles (GAAP) - correct
answer- a set of accounting standards that is used in the
preparation of financial statements
Securities and Exchange Commission (SEC) - correct answer-
-division of corporate finance: oversees financial reporting by
corporations
Financial Accounting Standards Board (FASB) - correct
answer- Types of pronouncements:
-Statements of Financial Accounting Standards
-Interpretations
-Financial Accounting Concepts
-Emerging Issues Task Force Statements
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International Financial Reporting Standards (IFRS) - correct
answer- unified set of international accounting standards
Assumption 1: Accounting Entity - correct answer- -a company
is considered a separate "living" enterprise apart from its
owners
-it is engaged in clearly-defined activities
-regularly reports its financial health to the general publics
-pays taxes and can file lawsuits
Assumption 2: Going Concern - correct answer- -a corporation
is assumed to remain in existence indefinitely
-assets and liabilities are recognized values that assume the
company will not have to sell them at liquidation
Assumption 3: Measurement - correct answer- -financial
statements must be reported in the national monetary unit
-can only show measurable activities of a corporation
Assumption 4: Periodicity - correct answer- -companies are
required to file annual and interim reports
-a fiscal year is frequently but not always aligned with the
calendar year
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Principle 1: Historical Cost - correct answer- -financial
statements report companies' resources at an initial historical
cost
-represents the easiest measurement method without a need a
for appraisal and revaluation
-minimized management discretion and subjectivity
-IFRS is more willing to allow this subjectivity to avoid
misrepresenting the true value of assets
Principle 2: Revenue Recognition - correct answer- accrual
basis of accounting dictates that revenues must be recorded
when earned and measurable
-cannot be recorded until the order is shipped to a customer
and collection from that customer (who uses a credit card) is
reasonably assured
Principle 3: Matching Principle - correct answer- costs
associated with making a product must be recorded during the
same period as revenue generated from that product
Principle 4: Full Disclosure - correct answer- companies must
reveal all relevant economic information that they determine to
make a difference to its users
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-should be accomplished in: financial statements, notes to
financial statements, and supplementary information
Contraint 1: Estimates & Judgements - correct answer- certain
measurements cannot be performed completely accurately and
must therefore utilize conservative estimates and judgements
Constraint 2: Materiality - correct answer- inclusion and
disclosure of financial transactions in financial statements hinge
on their size and effect on the company performing them
-materiality varies across different entities
Constraint 3: Consistency - correct answer- for each company,
the preparation financial statements must utilize measurement
techniques and assumptions which are consistent from one
period to another
Constraint 4: Conservatism - correct answer- financial
statements should be prepared with a downward measurement
bias
-assets and revenues should not be overstates, while liabilities
and expenses should not be understated
ACCOUNTING CRASH
COURSE QUESTIONS AND ANSWERS
2025
Accounting is important for - correct answer- firm's officers,
investors, lenders, and the general public
Generally Accepted Accounting Principles (GAAP) - correct
answer- a set of accounting standards that is used in the
preparation of financial statements
Securities and Exchange Commission (SEC) - correct answer-
-division of corporate finance: oversees financial reporting by
corporations
Financial Accounting Standards Board (FASB) - correct
answer- Types of pronouncements:
-Statements of Financial Accounting Standards
-Interpretations
-Financial Accounting Concepts
-Emerging Issues Task Force Statements
,2 | Page
International Financial Reporting Standards (IFRS) - correct
answer- unified set of international accounting standards
Assumption 1: Accounting Entity - correct answer- -a company
is considered a separate "living" enterprise apart from its
owners
-it is engaged in clearly-defined activities
-regularly reports its financial health to the general publics
-pays taxes and can file lawsuits
Assumption 2: Going Concern - correct answer- -a corporation
is assumed to remain in existence indefinitely
-assets and liabilities are recognized values that assume the
company will not have to sell them at liquidation
Assumption 3: Measurement - correct answer- -financial
statements must be reported in the national monetary unit
-can only show measurable activities of a corporation
Assumption 4: Periodicity - correct answer- -companies are
required to file annual and interim reports
-a fiscal year is frequently but not always aligned with the
calendar year
,3 | Page
Principle 1: Historical Cost - correct answer- -financial
statements report companies' resources at an initial historical
cost
-represents the easiest measurement method without a need a
for appraisal and revaluation
-minimized management discretion and subjectivity
-IFRS is more willing to allow this subjectivity to avoid
misrepresenting the true value of assets
Principle 2: Revenue Recognition - correct answer- accrual
basis of accounting dictates that revenues must be recorded
when earned and measurable
-cannot be recorded until the order is shipped to a customer
and collection from that customer (who uses a credit card) is
reasonably assured
Principle 3: Matching Principle - correct answer- costs
associated with making a product must be recorded during the
same period as revenue generated from that product
Principle 4: Full Disclosure - correct answer- companies must
reveal all relevant economic information that they determine to
make a difference to its users
, 4 | Page
-should be accomplished in: financial statements, notes to
financial statements, and supplementary information
Contraint 1: Estimates & Judgements - correct answer- certain
measurements cannot be performed completely accurately and
must therefore utilize conservative estimates and judgements
Constraint 2: Materiality - correct answer- inclusion and
disclosure of financial transactions in financial statements hinge
on their size and effect on the company performing them
-materiality varies across different entities
Constraint 3: Consistency - correct answer- for each company,
the preparation financial statements must utilize measurement
techniques and assumptions which are consistent from one
period to another
Constraint 4: Conservatism - correct answer- financial
statements should be prepared with a downward measurement
bias
-assets and revenues should not be overstates, while liabilities
and expenses should not be understated
