MAJOR FIELD TEST BUSINESS STUDY SET
COMPLETE REVIEW GUIDE PRACTICE
QUESTIONS AND ANSWERS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep and Comprehensive
Rationales Included
,Statement of Cash Flows 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 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 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 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 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 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 Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) Goods Available for Sale - Ending Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory Beginning Inventory + Purchases = Goods Available for Sale - Cost of Goods Sold
(COGS) = ending inventory
Periodic Inventory Accounting 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 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) Inventory Oldest items inventory are sold first .(Example: Fruit)
LIFO (Inventory) Most recent items added to inventory are sold first. (Example: Ore from Mining)
Average Cost (Inventory) Ending inventory units are costed using an average cost of goods available
divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) Inventory items are tagged with their cost. (Example: automobiles)
Generally Accepted Accounting Principles (GAAP) 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 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.
Management Accounting Concerned with identification, measurement, accumulation, analysis, preparation,
interpretation, and communication of financial information used my management
to plan and evaluate and control within an organization to assure appropriate use
of and accountability of resources.
Cost Accounting Concerned only with the cost of a product or service.
Product Costs Cost of the various products manufactured and sold by a company. (Examples:
Inventory Costs or Cost of Prodcution
Period Cost ll costs incurred by a company that are not considered product costs. (Examples:
Administration Expenses or Selling Expenses)
Direct Costs A cost that is easily traceable to the cost object and is a result solely of the cost
object. (Example: Lye used to make bars of soap.)
Indirect Cost A cost that supports more than one cost objects, and must be "allocated" to those
various cost objects (Example: Electricity used at a plant.)
COMPLETE REVIEW GUIDE PRACTICE
QUESTIONS AND ANSWERS
| GRADED A+ | GUARANTEED SUCCESS
Updated 2026 Questions and Answers
100% Verified Exam Prep and Comprehensive
Rationales Included
,Statement of Cash Flows 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 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 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 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 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 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 Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) Goods Available for Sale - Ending Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory Beginning Inventory + Purchases = Goods Available for Sale - Cost of Goods Sold
(COGS) = ending inventory
Periodic Inventory Accounting 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 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) Inventory Oldest items inventory are sold first .(Example: Fruit)
LIFO (Inventory) Most recent items added to inventory are sold first. (Example: Ore from Mining)
Average Cost (Inventory) Ending inventory units are costed using an average cost of goods available
divided by the units available for sale. (Example: Rope)
Specific Identification (Inventory) Inventory items are tagged with their cost. (Example: automobiles)
Generally Accepted Accounting Principles (GAAP) 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 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.
Management Accounting Concerned with identification, measurement, accumulation, analysis, preparation,
interpretation, and communication of financial information used my management
to plan and evaluate and control within an organization to assure appropriate use
of and accountability of resources.
Cost Accounting Concerned only with the cost of a product or service.
Product Costs Cost of the various products manufactured and sold by a company. (Examples:
Inventory Costs or Cost of Prodcution
Period Cost ll costs incurred by a company that are not considered product costs. (Examples:
Administration Expenses or Selling Expenses)
Direct Costs A cost that is easily traceable to the cost object and is a result solely of the cost
object. (Example: Lye used to make bars of soap.)
Indirect Cost A cost that supports more than one cost objects, and must be "allocated" to those
various cost objects (Example: Electricity used at a plant.)
