HBS Core - Accounting, Financial
Accounting latest test bank
updated questions 2026||A+
material exam ||actual and
verified update!!
Historical Cost Principle - ANSWER-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.
Assets = Liabilities + Equity - ANSWER-What is the Accounting Equation?
"Going Concern" Concept - ANSWER-What Accounting Principle Does the Following
Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufacturing. 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.
Liability - ANSWER-A "note payable for a bank loan" is an example of a...
future losses; future gains - ANSWER-The principle of Conservatism, says that a
company should choose measurement methods that anticipate and record
_____________ but don't anticipate and record _____________.
Materiality - ANSWER-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 program recently.
The company reports this situation in its financial statements as this might affect the
decisions of stakeholders.
Expense Account - ANSWER-Cost of Goods Sold, Rent Expense, and Wages Expense
are examples of what type of account?
,Debit - ANSWER-Sales Revenue & Deferred Revenue decrease with: Debit or Credit?
Decrease - ANSWER-Cost of Goods Sold, Accounts Receivable, Cash: Increase or
Decrease with a Credit
Debit - ANSWER-These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent
Credit - ANSWER-The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue
False: This is true for Cash Basis Accounting, but not for Accrual Accounting. -
ANSWER-True or False: Transactions are only recorded when there is an exchange of
cash
Financial performance over a given period of time - ANSWER-The income statement
reflects a company's:
The difference between the revenues/gains and expenses/losses. - ANSWER-What
represents the net income/(loss) for the year?
-CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY - ANSWER-Income Statement:
Examples of Permanent Accounts
-COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE - ANSWER-Income Statement:
Examples of Temporary Accounts
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. - ANSWER-
Nominal Accounts
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. - ANSWER-Real Accounts
,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. - ANSWER-Balance Sheet
long term liability account - ANSWER-What type of account is 'mortgage payable'?
A T-account shows all the activity for a given account for a specific period of time, or in
other words, the T-account is the summary of several journal entries. - ANSWER-T-
Account
liquidity - ANSWER-How quickly and easily an item can be converted to cash is known
as:
Materiality
The concept of materiality states that a business is not required to report information on
financial statements that would not impact the decision-making of the users of the
financial statements. - ANSWER-The trial balance for a business at a given point in time
typically has much more detailed information than what is depicted on the financial
statements. What is the accounting concept that allows for the information from the trial
balance to be condensed to what is displayed on the financial statements?
-Nominal accounts are reset to zero.
-Net income is transferred to the retained earnings account on the balance sheet. -
ANSWER-Steps of Closing Process include:
Gross Profit is equal to Sales Revenue minus Cost of Goods Sold, in this case
$1,600,000 - $640,000 = $960,000.
The Cost of Goods Sold of $640,000 is found by multiplying $1,600,000 by 40%. -
ANSWER-For the year 2015, Dark Horse Corp.'s sales revenue was $1,600,000. Cost
of goods sold (COGS) was 40% of sales revenue. Their income statement shows that
operating expense was $150,000.
What was Dark Horse Corp.'s gross profit for 2015?
The amount by which the revenue exceeds the cost of goods sold (or cost of sales).
Gross Profit = Net Sales - COGS - ANSWER-Gross Profit
explicit transaction
, This is an explicit transaction because the inventory being sold is the trigger for
recording the transaction. - ANSWER-Recognizing the revenue for inventory sold is an
example of what type of transaction?
Implicit transaction
This is an implicit transaction because there is not a specific event that triggers the
recording of the transaction. - ANSWER-Recognizing impairment on an intangible asset
is an example of what type of transaction?
The net book value is calculated by subtracting the accumulated depreciation from the
original cost of the asset.
$350,000 - $215,000 = $135,000 - ANSWER-A company purchased a piece of
equipment for $350,000 in 2008. As of 12/31/2015, $215,000 of depreciation expense
had been recognized against this piece of equipment.
What is the equipment's net book value on 12/31/2015?
A lower net income and a higher accumulated depreciation.
Using an accelerated depreciation method as compared to the straight-line method
means that a higher depreciation expense will be recognized in the early years so the
company will have a lower net income and a higher accumulated depreciation. -
ANSWER-West Corp. purchased a piece of equipment in January 2014. The
accountant of West Corp. decided to use double declining balance method to
depreciate this equipment.
For 2014, compared with using straight-line depreciation method, the company will
have:
Deferred Tax Asset - ANSWER-Taxable Income exceeds Income Before Taxes due to
a temporary timing difference.
product cost - ANSWER-Direct Labor, Manufacturing Overhead are examples of:
The correct answer is $6,328.75.
Under FIFO, the oldest purchased are expensed first as Cost of Sales. In this case, the
4,925 bottles of water sold in May include 1,832 bottles expensed at a cost of $1.00 per
bottle (related to February), 1,832 bottles expensed at a cost of $1.25 (related to March)
and 1,261 bottles expensed at a cost of $1.75 per bottle (related to April). - ANSWER-
Quench, a bottled water supplier, has 5,496 bottles of water in their warehouse at the
end of April. One third of the bottles were purchased in February at a cost of $1.00 per
bottle. Another third were purchased in the month of March at a cost of $1.25 per bottle.
The remaining third were purchased in April at a cost of $1.75 per bottle. The
Accounting latest test bank
updated questions 2026||A+
material exam ||actual and
verified update!!
Historical Cost Principle - ANSWER-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.
Assets = Liabilities + Equity - ANSWER-What is the Accounting Equation?
"Going Concern" Concept - ANSWER-What Accounting Principle Does the Following
Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufacturing. 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.
Liability - ANSWER-A "note payable for a bank loan" is an example of a...
future losses; future gains - ANSWER-The principle of Conservatism, says that a
company should choose measurement methods that anticipate and record
_____________ but don't anticipate and record _____________.
Materiality - ANSWER-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 program recently.
The company reports this situation in its financial statements as this might affect the
decisions of stakeholders.
Expense Account - ANSWER-Cost of Goods Sold, Rent Expense, and Wages Expense
are examples of what type of account?
,Debit - ANSWER-Sales Revenue & Deferred Revenue decrease with: Debit or Credit?
Decrease - ANSWER-Cost of Goods Sold, Accounts Receivable, Cash: Increase or
Decrease with a Credit
Debit - ANSWER-These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent
Credit - ANSWER-The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue
False: This is true for Cash Basis Accounting, but not for Accrual Accounting. -
ANSWER-True or False: Transactions are only recorded when there is an exchange of
cash
Financial performance over a given period of time - ANSWER-The income statement
reflects a company's:
The difference between the revenues/gains and expenses/losses. - ANSWER-What
represents the net income/(loss) for the year?
-CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY - ANSWER-Income Statement:
Examples of Permanent Accounts
-COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE - ANSWER-Income Statement:
Examples of Temporary Accounts
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. - ANSWER-
Nominal Accounts
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. - ANSWER-Real Accounts
,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. - ANSWER-Balance Sheet
long term liability account - ANSWER-What type of account is 'mortgage payable'?
A T-account shows all the activity for a given account for a specific period of time, or in
other words, the T-account is the summary of several journal entries. - ANSWER-T-
Account
liquidity - ANSWER-How quickly and easily an item can be converted to cash is known
as:
Materiality
The concept of materiality states that a business is not required to report information on
financial statements that would not impact the decision-making of the users of the
financial statements. - ANSWER-The trial balance for a business at a given point in time
typically has much more detailed information than what is depicted on the financial
statements. What is the accounting concept that allows for the information from the trial
balance to be condensed to what is displayed on the financial statements?
-Nominal accounts are reset to zero.
-Net income is transferred to the retained earnings account on the balance sheet. -
ANSWER-Steps of Closing Process include:
Gross Profit is equal to Sales Revenue minus Cost of Goods Sold, in this case
$1,600,000 - $640,000 = $960,000.
The Cost of Goods Sold of $640,000 is found by multiplying $1,600,000 by 40%. -
ANSWER-For the year 2015, Dark Horse Corp.'s sales revenue was $1,600,000. Cost
of goods sold (COGS) was 40% of sales revenue. Their income statement shows that
operating expense was $150,000.
What was Dark Horse Corp.'s gross profit for 2015?
The amount by which the revenue exceeds the cost of goods sold (or cost of sales).
Gross Profit = Net Sales - COGS - ANSWER-Gross Profit
explicit transaction
, This is an explicit transaction because the inventory being sold is the trigger for
recording the transaction. - ANSWER-Recognizing the revenue for inventory sold is an
example of what type of transaction?
Implicit transaction
This is an implicit transaction because there is not a specific event that triggers the
recording of the transaction. - ANSWER-Recognizing impairment on an intangible asset
is an example of what type of transaction?
The net book value is calculated by subtracting the accumulated depreciation from the
original cost of the asset.
$350,000 - $215,000 = $135,000 - ANSWER-A company purchased a piece of
equipment for $350,000 in 2008. As of 12/31/2015, $215,000 of depreciation expense
had been recognized against this piece of equipment.
What is the equipment's net book value on 12/31/2015?
A lower net income and a higher accumulated depreciation.
Using an accelerated depreciation method as compared to the straight-line method
means that a higher depreciation expense will be recognized in the early years so the
company will have a lower net income and a higher accumulated depreciation. -
ANSWER-West Corp. purchased a piece of equipment in January 2014. The
accountant of West Corp. decided to use double declining balance method to
depreciate this equipment.
For 2014, compared with using straight-line depreciation method, the company will
have:
Deferred Tax Asset - ANSWER-Taxable Income exceeds Income Before Taxes due to
a temporary timing difference.
product cost - ANSWER-Direct Labor, Manufacturing Overhead are examples of:
The correct answer is $6,328.75.
Under FIFO, the oldest purchased are expensed first as Cost of Sales. In this case, the
4,925 bottles of water sold in May include 1,832 bottles expensed at a cost of $1.00 per
bottle (related to February), 1,832 bottles expensed at a cost of $1.25 (related to March)
and 1,261 bottles expensed at a cost of $1.75 per bottle (related to April). - ANSWER-
Quench, a bottled water supplier, has 5,496 bottles of water in their warehouse at the
end of April. One third of the bottles were purchased in February at a cost of $1.00 per
bottle. Another third were purchased in the month of March at a cost of $1.25 per bottle.
The remaining third were purchased in April at a cost of $1.75 per bottle. The
