ETS MAJOR FIELD TEST QUIZ SCRIPT
REVIEW SET VIEW AHEAD ASSESSMENT
2026 100% CORRECT.
⫸ Income Statement. Answer: 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).
Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: Beginning Inventory
+ Purchases = Goods
⫸ Basic Inventory Equation for Cost of Goods Sold (COGS).
Answer: Goods Available for Sale - Ending Inventory = Cost of
Goods Sold (COGS)
⫸ Basic Inventory Equation for Ending Inventory. Answer:
Beginning Inventory + Purchases = Goods Available for Sale - Cost of
Goods Sold (COGS) = ending inventory
⫸ Periodic Inventory Accounting. Answer: 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. Answer: 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). Answer: Inventory Oldest items inventory are
sold first .(Example: Fruit)
⫸ LIFO (Inventory). Answer: Most recent items added to inventory
are sold first. (Example: Ore from Mining)
⫸ Average Cost (Inventory). Answer: Ending inventory units are
costed using an average cost of goods available divided by the units
available for sale. (Example: Rope)
⫸ Specific Identification (Inventory). Answer: Inventory items are
tagged with their cost. (Example: automobiles)
⫸ Generally Accepted Accounting Principles (GAAP). Answer: 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. Answer: 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.
REVIEW SET VIEW AHEAD ASSESSMENT
2026 100% CORRECT.
⫸ Income Statement. Answer: 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).
Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: 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. Answer: Beginning Inventory
+ Purchases = Goods
⫸ Basic Inventory Equation for Cost of Goods Sold (COGS).
Answer: Goods Available for Sale - Ending Inventory = Cost of
Goods Sold (COGS)
⫸ Basic Inventory Equation for Ending Inventory. Answer:
Beginning Inventory + Purchases = Goods Available for Sale - Cost of
Goods Sold (COGS) = ending inventory
⫸ Periodic Inventory Accounting. Answer: 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. Answer: 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). Answer: Inventory Oldest items inventory are
sold first .(Example: Fruit)
⫸ LIFO (Inventory). Answer: Most recent items added to inventory
are sold first. (Example: Ore from Mining)
⫸ Average Cost (Inventory). Answer: Ending inventory units are
costed using an average cost of goods available divided by the units
available for sale. (Example: Rope)
⫸ Specific Identification (Inventory). Answer: Inventory items are
tagged with their cost. (Example: automobiles)
⫸ Generally Accepted Accounting Principles (GAAP). Answer: 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. Answer: 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.
