ACCT 229 TAMU 2026 FINAL EXAM QUESTIONS AND
ANSWERS RATED A+
✔✔Business - ✔✔all activities necessary to provide the members of an economic
system with goods and services
✔✔Understandability - ✔✔information should be comprehensible to those who are
willing to spend time to understand it.
✔✔Relevance - ✔✔capacity of information to make a difference in a decision
✔✔Faithful Representation - ✔✔is complete, neutral, and free from error
✔✔Comparability - ✔✔allows user to analyze two or more companies and look for
similarities or differences.
-compare company one 8/2016 to company 2 8/2016
✔✔Consistency - ✔✔allows comparisons within a company from one accounting period
to the next.
-compare company 1 8/2016 to company 1 8/2015
✔✔Materiality - ✔✔the dollar magnitude of the transaction makes a difference in how it
is recorded. Does an error in any way affect the judgment of someone relying on the
information.
✔✔Conservatism - ✔✔dont overstate assets or revenues, dont understate liabilities or
expenses. Use least optimistic estimate when two estimates of amounts are about
equally likely
✔✔How to analyze profitability - ✔✔Gross Profit Ratio
Profit Margin
✔✔Gross Profit & Ratio - ✔✔ratio of gross profit to sales.
Rev - COGS = Gross Profit
GP/Sales = GPR
✔✔Profit Margin - ✔✔Return on sales - ratio of net income to sales. Shows profitability
of company.
net income/Sales = profit margin
, ✔✔How to analyze liquidity - ✔✔Working Capital
Current Ratio
✔✔Working capital - ✔✔current assets - current liabilities
✔✔Current ratio - ✔✔current assets/current liabilities
✔✔Assets - ✔✔future economic benefits (resources) owned by or owed to the firm
✔✔cash - ✔✔current asset
✔✔MES (marketable equity securities) - ✔✔current asset
✔✔Accounts Receivable - ✔✔current assets
✔✔Inventory - ✔✔current assets
✔✔Supplies (on hand) - ✔✔current assets
✔✔Prepaid Expenses - ✔✔current assets
✔✔Land - ✔✔non-current assets
✔✔Building - ✔✔non-current assets
✔✔Equipment - ✔✔non-current assets
✔✔Furniture & Fixtures - ✔✔non-current assets
✔✔Vehicle - ✔✔non-current assets
✔✔Accumulated Depreciation - ✔✔non-current assets (CONTRA ASSET)
✔✔Plant, Property, & Equipment (fixed assets) - ✔✔acquired for use in business rather
than resale to customers.
Land, building, equipment, Furniture and fixtures, vehicles, AD
✔✔Intangible Assets - ✔✔lack physical substance, but help to generate revenue
✔✔Intangible Assets - ✔✔patent, trademark, copyright, franchise, goodwill
✔✔accounts payable - ✔✔current liability
ANSWERS RATED A+
✔✔Business - ✔✔all activities necessary to provide the members of an economic
system with goods and services
✔✔Understandability - ✔✔information should be comprehensible to those who are
willing to spend time to understand it.
✔✔Relevance - ✔✔capacity of information to make a difference in a decision
✔✔Faithful Representation - ✔✔is complete, neutral, and free from error
✔✔Comparability - ✔✔allows user to analyze two or more companies and look for
similarities or differences.
-compare company one 8/2016 to company 2 8/2016
✔✔Consistency - ✔✔allows comparisons within a company from one accounting period
to the next.
-compare company 1 8/2016 to company 1 8/2015
✔✔Materiality - ✔✔the dollar magnitude of the transaction makes a difference in how it
is recorded. Does an error in any way affect the judgment of someone relying on the
information.
✔✔Conservatism - ✔✔dont overstate assets or revenues, dont understate liabilities or
expenses. Use least optimistic estimate when two estimates of amounts are about
equally likely
✔✔How to analyze profitability - ✔✔Gross Profit Ratio
Profit Margin
✔✔Gross Profit & Ratio - ✔✔ratio of gross profit to sales.
Rev - COGS = Gross Profit
GP/Sales = GPR
✔✔Profit Margin - ✔✔Return on sales - ratio of net income to sales. Shows profitability
of company.
net income/Sales = profit margin
, ✔✔How to analyze liquidity - ✔✔Working Capital
Current Ratio
✔✔Working capital - ✔✔current assets - current liabilities
✔✔Current ratio - ✔✔current assets/current liabilities
✔✔Assets - ✔✔future economic benefits (resources) owned by or owed to the firm
✔✔cash - ✔✔current asset
✔✔MES (marketable equity securities) - ✔✔current asset
✔✔Accounts Receivable - ✔✔current assets
✔✔Inventory - ✔✔current assets
✔✔Supplies (on hand) - ✔✔current assets
✔✔Prepaid Expenses - ✔✔current assets
✔✔Land - ✔✔non-current assets
✔✔Building - ✔✔non-current assets
✔✔Equipment - ✔✔non-current assets
✔✔Furniture & Fixtures - ✔✔non-current assets
✔✔Vehicle - ✔✔non-current assets
✔✔Accumulated Depreciation - ✔✔non-current assets (CONTRA ASSET)
✔✔Plant, Property, & Equipment (fixed assets) - ✔✔acquired for use in business rather
than resale to customers.
Land, building, equipment, Furniture and fixtures, vehicles, AD
✔✔Intangible Assets - ✔✔lack physical substance, but help to generate revenue
✔✔Intangible Assets - ✔✔patent, trademark, copyright, franchise, goodwill
✔✔accounts payable - ✔✔current liability
