Financial Accounting (CLEP) Exam with verified detailed answers

Financial Accounting (CLEP) Exam with || || || || ||




verified detailed answers || ||




GAAP - correct answer✔✔Generally Accepted Accounting Principles
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FASB - correct answer✔✔Financial Accounting Standards Board; develops GAAP for public
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companies.


Conservative Principle - correct answer✔✔The accounting principle requires accountants to || || || || || || || || || ||




resolve financial statement uncertainty in the least favorable way.
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LCM - correct answer✔✔Lower of cost or market.
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- An inventory valuation method.
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- inventory is purchased by a company, then, over time, the value of the inventory may depreciate
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or appreciate. To increase the reliability of financial statements, the changing value of inventory,
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to an extent, must be accounted for.
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Going Concern Principle - correct answer✔✔the life of the business is assumed to be continuous,
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and its records are kept on that basis
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Historical Cost Principle - correct answer✔✔An accounting principle that states that companies
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should record assets at their historical cost.
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Objectivity Principle - correct answer✔✔The accounting principle that requires business
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transactions to be recorded using the best objective evidence || || || || || || || ||




Monetary Unit Principle - correct answer✔✔Principle that assumes transactions and events can
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be expressed in money units.
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,Financial Management - correct answer✔✔the job of managing a firm's resources so it can meet
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its goals and objectives. Top Priority
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Financial Statements - correct answer✔✔periodic reports published by the company for the
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purpose of providing information to external users. Helps Owner's, Investors, and creditors.
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Balance Sheet - correct answer✔✔A financial statement that reports assets, liabilities, and
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owner's equity on a specific date. || || || || ||




income statement - correct answer✔✔A financial statement showing the revenue and expenses
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for a fiscal period. Results of Business ops.
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Statement of Cash Flows - correct answer✔✔A financial statement that provides financial
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information about the cash receipts and cash payments of a business for a specific period of time.
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Full Disclosure - correct answer✔✔providing all information necessary for consumers to make
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an informed decision
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Capital Allocation - correct answer✔✔the choice between risky and risk-free assets
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standard setting - correct answer✔✔(promises) || || || ||




FRS - correct answer✔✔Financial Reporting Standard
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Expectation Gap - correct answer✔✔what the public thinks accountants should do and what
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accountants think they can do || || || ||




SOX - correct answer✔✔Sarbanes-Oxley act of 2002: enacted in response to the financial
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scandals to protect shareholders and the general public from accounting errors and fraudulent
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practices.

, Ethics in Accounting - correct answer✔✔accountants can't be biased!
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-SEC can punish legally
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-AICPA can strip license || || ||




-business community can make you lost credibility which can really damage business
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have issues with this bc of making professional judgment decisions
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SEC - correct answer✔✔Securities and Exchange Commission
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Matching Principle - correct answer✔✔Guides accounting for expenses, ensures that all expenses
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are recorded when they are incurred during the period, and matches those expenses against the
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revenues of the period. || || ||




double-entry accounting - correct answer✔✔principle requiring that all transactions yet recorded
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twice; thus allowing for checks and balances and, therefore, equal debits and credits.
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Transaction Analysis - correct answer✔✔the process of studying a transaction to determine its
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economic effect on the business in terms of the accounting equation
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Accounting Equation - correct answer✔✔An equation showing the relationship among assets,
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liabilities, and owner's equity || || ||




Assets - correct answer✔✔resources owned by a business for future use. Liabilities + Owner's
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Equity


Liabilities - correct answer✔✔debts that you owe. Assets - Owner's Equity
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Owner's Equity - correct answer✔✔the owner's claims to the assets of the business.
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Equation: Assets - Liabilities || || ||