ACCT 229 STUDY GUIDE 2026 MANUAL QUESTIONS
AND ANSWERS RATED A+
✔✔accounts payable - ✔✔we owe for product (inv/supplies) we have received
✔✔unearned revenue - ✔✔customer has paid but we have not yet delivered
goods/services
✔✔short term note payable - ✔✔borrowed $ (same thing as loan) paid in the next 12
months
✔✔long term note payable - ✔✔borrowed $ that u pay back over a period of time
greater than a year
✔✔bond payable - ✔✔no definition or dont worry about it; think of school bond
✔✔mortgage payable - ✔✔borrowed $ for house, land, etc.
✔✔stockholders equity - ✔✔claims for owners against the net assets of the firm (assets
- liabilities =she)
✔✔common stock - ✔✔investments made by owners (purchase of stock -> common
stock)
✔✔retained earnings - ✔✔cumulative earnings of the company that have been retained
(reinvested; not paid out) by the company
✔✔income statement - ✔✔shows results of the company's operations (flows of revenue
and expenses) for a period of time
✔✔operating revenues - ✔✔inflows of assets (cash or acct receiveable) as a result of
performing a service or delivering a good; sales or service revenue
✔✔other gains - ✔✔inflows of assets (cash or AR) as a result of an incidental
transaction
ex. sale of land, equipment, etc.
✔✔operating expenses - ✔✔resources used to generate revenue
✔✔other losses - ✔✔decreases in assets as a result of an incidental transaction
✔✔statement of retained earnings - ✔✔shows how net income & dividends causes
change in a company's financial position during a period of time
, ✔✔statement of stockholder's equity - ✔✔shows how net income, dividends., and
changes in stock cause change in a company's financial position during a period of time
✔✔statement of cash flow - ✔✔shows actual change in cash of a company for a period
of time
✔✔working capital - ✔✔current assets - current liabilities
measures liquidity in terms of ability to pay creditors
✔✔liquidity - ✔✔the ease with which an asset can be converted into cash
✔✔current ratio - ✔✔current assets/current liabilities
useful to compare liquidity among companies
✔✔gross profit ratio - ✔✔gross profit/sales
"for every $1 sold, we kepy _% of that dollar"
✔✔profit margin (return on sales) - ✔✔net income/sales
"when everything is done we kept _% on the dollar"
✔✔GAAP - ✔✔Generally Accepted Accounting Principles
✔✔Financial Accounting Standards Board (FASB) - ✔✔private sector body given
responsibility to develop GAAP
✔✔Securities and Exchange Commission (SEC) - ✔✔gov agency that has broad
powers to prescribe accounting practices and standards to public companies
✔✔AICPA - ✔✔American Institute of Certified Public Accountants
✔✔IASB - ✔✔International Accounting Standards Board
✔✔Public Company Accounting Oversight Board (PCAOB) - ✔✔five member body that
sets auditing standards
✔✔management's responsibility - ✔✔Ultimately responsible for the accuracy of financial
statements
✔✔purpose of an audit - ✔✔attest to the FAIRNESS of financial statement "in
accordance with GAAP"
AND ANSWERS RATED A+
✔✔accounts payable - ✔✔we owe for product (inv/supplies) we have received
✔✔unearned revenue - ✔✔customer has paid but we have not yet delivered
goods/services
✔✔short term note payable - ✔✔borrowed $ (same thing as loan) paid in the next 12
months
✔✔long term note payable - ✔✔borrowed $ that u pay back over a period of time
greater than a year
✔✔bond payable - ✔✔no definition or dont worry about it; think of school bond
✔✔mortgage payable - ✔✔borrowed $ for house, land, etc.
✔✔stockholders equity - ✔✔claims for owners against the net assets of the firm (assets
- liabilities =she)
✔✔common stock - ✔✔investments made by owners (purchase of stock -> common
stock)
✔✔retained earnings - ✔✔cumulative earnings of the company that have been retained
(reinvested; not paid out) by the company
✔✔income statement - ✔✔shows results of the company's operations (flows of revenue
and expenses) for a period of time
✔✔operating revenues - ✔✔inflows of assets (cash or acct receiveable) as a result of
performing a service or delivering a good; sales or service revenue
✔✔other gains - ✔✔inflows of assets (cash or AR) as a result of an incidental
transaction
ex. sale of land, equipment, etc.
✔✔operating expenses - ✔✔resources used to generate revenue
✔✔other losses - ✔✔decreases in assets as a result of an incidental transaction
✔✔statement of retained earnings - ✔✔shows how net income & dividends causes
change in a company's financial position during a period of time
, ✔✔statement of stockholder's equity - ✔✔shows how net income, dividends., and
changes in stock cause change in a company's financial position during a period of time
✔✔statement of cash flow - ✔✔shows actual change in cash of a company for a period
of time
✔✔working capital - ✔✔current assets - current liabilities
measures liquidity in terms of ability to pay creditors
✔✔liquidity - ✔✔the ease with which an asset can be converted into cash
✔✔current ratio - ✔✔current assets/current liabilities
useful to compare liquidity among companies
✔✔gross profit ratio - ✔✔gross profit/sales
"for every $1 sold, we kepy _% of that dollar"
✔✔profit margin (return on sales) - ✔✔net income/sales
"when everything is done we kept _% on the dollar"
✔✔GAAP - ✔✔Generally Accepted Accounting Principles
✔✔Financial Accounting Standards Board (FASB) - ✔✔private sector body given
responsibility to develop GAAP
✔✔Securities and Exchange Commission (SEC) - ✔✔gov agency that has broad
powers to prescribe accounting practices and standards to public companies
✔✔AICPA - ✔✔American Institute of Certified Public Accountants
✔✔IASB - ✔✔International Accounting Standards Board
✔✔Public Company Accounting Oversight Board (PCAOB) - ✔✔five member body that
sets auditing standards
✔✔management's responsibility - ✔✔Ultimately responsible for the accuracy of financial
statements
✔✔purpose of an audit - ✔✔attest to the FAIRNESS of financial statement "in
accordance with GAAP"
