PEREGRINE EXAM QUESTIONS &
ELABORATED ANSWERS RATED
100% CORRECT NEWEST VERSION
What is a general ledger? - Correct Answer ✔✔ A general ledger account is an account
or record used to sort, store and summarize a company's transactions.
asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and
Equipment
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses
Payable, and Customer Deposits
stockholders' equity accounts such as Common Stock, Retained Earnings, Treasury
Stock, and Accumulated Other Comprehensive Income
What is the difference between accounts payable and accounts receivable? - Correct
Answer ✔✔ Accounts payable is a current liability account in which a company records
the amounts it owes to suppliers or vendors for goods or services that it received on
credit.
Accounts receivable is a current asset account in which a company records the
amounts it has a right to collect from customers who received goods or services on
credit.
What is the cost of goods sold? - Correct Answer ✔✔ The cost of goods sold is the cost
of the products that a retailer, distributor, or manufacturer has sold.
What is owner's equity? - Correct Answer ✔✔ Owner's equity is one of the three main
sections of a sole proprietorship's balance sheet and one of the components of the
accounting equation: Assets = Liabilities + Owner's Equity.
What is principles of accounting? - Correct Answer ✔✔ Principles of accounting can
also refer to the basic or fundamental accounting principles: cost principles, matching
principles, full disclosure principles, materiality principles, going concern principles,
economic entity principles, and so on. In this context, principles of accounting refers to
the broad underlying concepts which guide accountants when preparing financial
statements.
What is equity? - Correct Answer ✔✔ Equity can indicate an ownership interest in a
business, such as stockholders' equity or owner's equity.
, Equity can mean an owner's interest in a personal asset. For example, the owner of a
$200,000 house that has a mortgage loan of $75,000 is said to have $125,000 of equity
in the house.
What is meant by reconciling an account? - Correct Answer ✔✔ Reconciling an account
is likely to mean proving or documenting that an account balance is correct.
What is included in cash and cash equivalents? - Correct Answer ✔✔ In accounting, a
company's cash includes the following:
currency and coins
checks received from customers but not yet deposited
checking accounts
petty cash
Cash equivalents are short-term, highly liquid investments with a maturity date that was
3 months or less at the time of purchase.
money market accounts
U.S. Treasury Bills
commercial paper
What is the difference between an implicit cost and an explicit cost? - Correct Answer
✔✔ An implicit cost is present but it is not initially shown or reported as a separate cost.
An explicit cost is a cost that is present and it is clearly shown or reported as a separate
cost.
What is the difference between stocks and bonds? - Correct Answer ✔✔ Stocks, or
shares of capital stock, represent an ownership interest in a corporation. Every
corporation has common stock.
Bonds are a form of long-term debt in which the issuing corporation promises to pay the
principal amount at a specified maturity date.
AN INCREASE TO WHICH OF THE FOLLOWING ACCOUNTS WILL INCREASE
OWNERS' EQUITY? - Correct Answer ✔✔ Client Fees
IN TIMES OF RISING PRICES, THE INVENTORY COST METHOD THAT WILL YIELD
THE LOWEST NET INCOME IS: - Correct Answer ✔✔ LIFO (LIFO is the acronym for
last-in, first-out, which is a cost flow assumption often used by U.S. corporations in
moving costs from inventory to the cost of goods sold.
Example: Assume that a corporation uses LIFO and has three units of a product in its
inventory. Due to its supplier raising its prices, the corporation purchased the items at
different costs and in the following sequence: $40, $44, and $46. The corporation ships
the oldest item (the one purchased for $40) to a customer at a selling price of $60.
However, under the LIFO cost flow assumption the company reports its cost of goods
sold at $46 (the latest cost) and reports a gross profit of $14. (The costs of $40 and $44
remain in inventory.)
ELABORATED ANSWERS RATED
100% CORRECT NEWEST VERSION
What is a general ledger? - Correct Answer ✔✔ A general ledger account is an account
or record used to sort, store and summarize a company's transactions.
asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and
Equipment
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses
Payable, and Customer Deposits
stockholders' equity accounts such as Common Stock, Retained Earnings, Treasury
Stock, and Accumulated Other Comprehensive Income
What is the difference between accounts payable and accounts receivable? - Correct
Answer ✔✔ Accounts payable is a current liability account in which a company records
the amounts it owes to suppliers or vendors for goods or services that it received on
credit.
Accounts receivable is a current asset account in which a company records the
amounts it has a right to collect from customers who received goods or services on
credit.
What is the cost of goods sold? - Correct Answer ✔✔ The cost of goods sold is the cost
of the products that a retailer, distributor, or manufacturer has sold.
What is owner's equity? - Correct Answer ✔✔ Owner's equity is one of the three main
sections of a sole proprietorship's balance sheet and one of the components of the
accounting equation: Assets = Liabilities + Owner's Equity.
What is principles of accounting? - Correct Answer ✔✔ Principles of accounting can
also refer to the basic or fundamental accounting principles: cost principles, matching
principles, full disclosure principles, materiality principles, going concern principles,
economic entity principles, and so on. In this context, principles of accounting refers to
the broad underlying concepts which guide accountants when preparing financial
statements.
What is equity? - Correct Answer ✔✔ Equity can indicate an ownership interest in a
business, such as stockholders' equity or owner's equity.
, Equity can mean an owner's interest in a personal asset. For example, the owner of a
$200,000 house that has a mortgage loan of $75,000 is said to have $125,000 of equity
in the house.
What is meant by reconciling an account? - Correct Answer ✔✔ Reconciling an account
is likely to mean proving or documenting that an account balance is correct.
What is included in cash and cash equivalents? - Correct Answer ✔✔ In accounting, a
company's cash includes the following:
currency and coins
checks received from customers but not yet deposited
checking accounts
petty cash
Cash equivalents are short-term, highly liquid investments with a maturity date that was
3 months or less at the time of purchase.
money market accounts
U.S. Treasury Bills
commercial paper
What is the difference between an implicit cost and an explicit cost? - Correct Answer
✔✔ An implicit cost is present but it is not initially shown or reported as a separate cost.
An explicit cost is a cost that is present and it is clearly shown or reported as a separate
cost.
What is the difference between stocks and bonds? - Correct Answer ✔✔ Stocks, or
shares of capital stock, represent an ownership interest in a corporation. Every
corporation has common stock.
Bonds are a form of long-term debt in which the issuing corporation promises to pay the
principal amount at a specified maturity date.
AN INCREASE TO WHICH OF THE FOLLOWING ACCOUNTS WILL INCREASE
OWNERS' EQUITY? - Correct Answer ✔✔ Client Fees
IN TIMES OF RISING PRICES, THE INVENTORY COST METHOD THAT WILL YIELD
THE LOWEST NET INCOME IS: - Correct Answer ✔✔ LIFO (LIFO is the acronym for
last-in, first-out, which is a cost flow assumption often used by U.S. corporations in
moving costs from inventory to the cost of goods sold.
Example: Assume that a corporation uses LIFO and has three units of a product in its
inventory. Due to its supplier raising its prices, the corporation purchased the items at
different costs and in the following sequence: $40, $44, and $46. The corporation ships
the oldest item (the one purchased for $40) to a customer at a selling price of $60.
However, under the LIFO cost flow assumption the company reports its cost of goods
sold at $46 (the latest cost) and reports a gross profit of $14. (The costs of $40 and $44
remain in inventory.)
