HBS CORE Questions and Answers
1. What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to
be worth $500,000, it is recorded at $250,000 because that is the price he paid
for it. - ANSWER -Historical Cost Principle
2. What is the Accounting Equation? - ANSWER -Assets = Liabilities + Equity
3. What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufactur-
ing. AQG records the purchase as an increase in inventory and an increase in
accounts payable. AQG feels that they will be able to realize the value from the
inventory and settle the obligation to RSI in the weeks to come. - ANSWER -
"Going Concern" Concept
4. A "note payable for a bank loan" is an example of a... - ANSWER -Liability
5. The principle of Conservatism, says that a company should choose measure-
ment methods that anticipate and record but don't anticipate and
record . - ANSWER -future losses; future gains
6. What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies
to finance start-ups in rural areas. However, the government has cut the pro-
gram recently. The company reports this situation in its financial statements as
this might affect the decisions of stakeholders. - ANSWER -Materiality
7. Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what
type of account? - ANSWER -Expense Account
8. Sales Revenue & Deferred Revenue decrease with - ANSWER -Debit or Credit?
- ANSWER -Debit
9. Cost of Goods Sold, Accounts Receivable, Cash - ANSWER -Increase or
Decrease with a Credit - ANSWER -Decrease
10. These accounts increase with a debit or credit -
, HBS CORE Questions and Answers
ANSWER -Cash, Depreciation Expense, Prepaid
Rent - ANSWER -Debit
, HBS CORE Questions and Answers
11. The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue - ANSWER -Credit
12. True or False - ANSWER -Transactions are only recorded when there is an
exchange of cash - ANSWER -False - ANSWER -This is true for Cash Basis Accounting, but not for Accrual
Accounting.
13. The income statement reflects a company's: - ANSWER -Financial performance over a
given period of time
14. What represents the net income/(loss) for the year? - ANSWER -The ditterence
between the rev- enues/gains and expenses/losses.
15. Income Statement:
Examples of Permanent Accounts - ANSWER --CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
16. Income Statement:
Examples of Temporary Accounts - ANSWER --COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
17. Nominal Accounts - ANSWER -Accounts that are reset to zero at the end of each accounting period.
Nominal accounts include all revenue and expense accounts, and may also be referred to as temporary accounts or
Income Statement accounts. The net balance of nominal accounts is transferred to retained earnings at the end of each
accounting period.
18. Real Accounts - ANSWER -Accounts which contain cumulative balances since the inception of the business.
The balances in these accounts flow from one accounting period to the next. Real accounts include all asset,
liability, and owners' equity accounts and may also be referred to as permanent accounts or Balance Sheet
accounts.
19. Balance Sheet - ANSWER -Financial report that shows the financial position of a company at a specific
point in time; a snapshot of the resources that are owned or controlled by company, and how those resources
were financed. The balance sheet shows the balance of all asset, liability, and equity accounts as of a given date.
20. What type of account is 'mortgage payable'? - ANSWER -long term liability account
21. T-Account - ANSWER -A T-account shows all the activity for a given account for a specific period of time, or in
1. What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to
be worth $500,000, it is recorded at $250,000 because that is the price he paid
for it. - ANSWER -Historical Cost Principle
2. What is the Accounting Equation? - ANSWER -Assets = Liabilities + Equity
3. What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufactur-
ing. AQG records the purchase as an increase in inventory and an increase in
accounts payable. AQG feels that they will be able to realize the value from the
inventory and settle the obligation to RSI in the weeks to come. - ANSWER -
"Going Concern" Concept
4. A "note payable for a bank loan" is an example of a... - ANSWER -Liability
5. The principle of Conservatism, says that a company should choose measure-
ment methods that anticipate and record but don't anticipate and
record . - ANSWER -future losses; future gains
6. What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies
to finance start-ups in rural areas. However, the government has cut the pro-
gram recently. The company reports this situation in its financial statements as
this might affect the decisions of stakeholders. - ANSWER -Materiality
7. Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what
type of account? - ANSWER -Expense Account
8. Sales Revenue & Deferred Revenue decrease with - ANSWER -Debit or Credit?
- ANSWER -Debit
9. Cost of Goods Sold, Accounts Receivable, Cash - ANSWER -Increase or
Decrease with a Credit - ANSWER -Decrease
10. These accounts increase with a debit or credit -
, HBS CORE Questions and Answers
ANSWER -Cash, Depreciation Expense, Prepaid
Rent - ANSWER -Debit
, HBS CORE Questions and Answers
11. The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue - ANSWER -Credit
12. True or False - ANSWER -Transactions are only recorded when there is an
exchange of cash - ANSWER -False - ANSWER -This is true for Cash Basis Accounting, but not for Accrual
Accounting.
13. The income statement reflects a company's: - ANSWER -Financial performance over a
given period of time
14. What represents the net income/(loss) for the year? - ANSWER -The ditterence
between the rev- enues/gains and expenses/losses.
15. Income Statement:
Examples of Permanent Accounts - ANSWER --CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
16. Income Statement:
Examples of Temporary Accounts - ANSWER --COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
17. Nominal Accounts - ANSWER -Accounts that are reset to zero at the end of each accounting period.
Nominal accounts include all revenue and expense accounts, and may also be referred to as temporary accounts or
Income Statement accounts. The net balance of nominal accounts is transferred to retained earnings at the end of each
accounting period.
18. Real Accounts - ANSWER -Accounts which contain cumulative balances since the inception of the business.
The balances in these accounts flow from one accounting period to the next. Real accounts include all asset,
liability, and owners' equity accounts and may also be referred to as permanent accounts or Balance Sheet
accounts.
19. Balance Sheet - ANSWER -Financial report that shows the financial position of a company at a specific
point in time; a snapshot of the resources that are owned or controlled by company, and how those resources
were financed. The balance sheet shows the balance of all asset, liability, and equity accounts as of a given date.
20. What type of account is 'mortgage payable'? - ANSWER -long term liability account
21. T-Account - ANSWER -A T-account shows all the activity for a given account for a specific period of time, or in
