ETS Exam Study Questions: Accounting Graded A+

Helpful in determining past and future performance, contains revenues and expenses: A) Income statement, B) Retained earnings statement, C) Balance Sheet, D) Statement of cash flows - Answer-A) Income Statement Defines Assets = liabilities + Shareholder's equity: A) Income statement, B) Retained earnings statement, C) Balance Sheet, D) Statement of cash flows - Answer-C) Balance Sheet Shows the amounts and causes of changes in retained earnings during the stated period, Solved by starting retained earnings + net income - dividends paid: A) Income statement, B) Retained earnings statement, C) Balance Sheet, D) Statement of cash flows - Answer-B) Retained Earnings Statement Which has been adopted as the standard financial statement? A) Income statement, B) Retained earnings statement, C) Balance Sheet, D) Statement of cash flows - Answer-D) Statement of cash flows True or False: Costs that attach to the units that are produced are not reported as expenses until the goods are sold - Answer-True What is Lifo? - Answer-recording the last units purchased as the first goods sold What is fifo? - Answer-Recording the oldest units will be first to be sold A formal written statement of management's plans for a specific future time period expressed in financial terms - Answer-A budget A system of cost accounting which is designed to find out how much should be the cost of a product under the existing conditions - Answer-Standard costingWhat Assumption states that the business will remain in operation for the foreseeable future? - Answer-Going Concern Assumption What is the full disclosure principle? - Answer-Requires that all circumstances and events that would make a difference to financial statement users should be disclosed Any factor whose change "causes" a change in the total cost of a related - Answer-Cost Driver Costs that can be traced to a given cost object (product, department, etc.) in an economically feasible way. - Answer-Direct Cost Costs that cannot be traced to a given cost object in an economically feasible way. These costs are also known as "overhead". - Answer-Indirect Costs Explain Lifo - Answer-LIFO-recording the last units purchased as the first goods sold In times of inflation, LIFO results in higher reported cost of goods sold and thus lower income and retained earnings This leads to lower taxes, which results in higher net income Results in lower reported assets and equity In the case of LIFO, the business will appear less well off Explain Fifo - Answer-In times of inflation, FIFO results in lower reported cost of goods sold and thus higher income and higher retained earnings This leads to higher taxes, which results in lower net income Results in higher reported assets and equity Business will appear better off than in LIFOWhat is ABC costing compared to a traditional costing system? - Answer-In a traditional costing system, and labor rate or manufacturing rate is set for the year and used as a figure for all costs. In ABC, the rates differ between activities, which could include units produced, direct labor hours, set up hours, etc. Formula For Break Even Point? - Answer-Fixed Costs/ Contribution Margin Formula For Contribution Margin? - Answer-selling price per unit / variable cost per unit What is the Contribution Margin? - Answer-A number that shows the amount of money each unit chips away at a fixed cost to give us a break even point What year was the international accounting standards commmittee formed? - Answer-1973 Which internal control is demonstrated by assigning different individuals to be responsible for related activities? a. Documentation procedures b. Segregation of duties c. Establishment of responsibility d. Independent internal verification - Answer-b. Segregation of duties