WSP Basic Accounting Principles (| ACTUAL EXAM
QUESTIONS WITH ANSWERS VERIFIED 100%
CORRECT
Income Statement
Financial report that depicts the operating performance (profitability) of a company
over a specific period of time.
Net Revenues
Total dollar payments for goods and services that are credited to an income statement
over a particular time period.
Costs of Goods Sold
Represents a company's direct cost of manufacture or procurement of a good or service
that a company sells to generate revenue.
Gross Profit
Revenues - COGS
Selling, General and Administrative (SG&A)
Operating costs not directly associated with production or procurement of a product or
service. These operating costs include payroll, wages, commissions, meal and travel
expenses, etc.
Research and Development (R&D)
A company's activities that are directed at developing new products or procedures.
EBITDA
,Earnings before interest, taxes, depreciation, and amortization ; Gross Profit - SG&A -
R&D.
Depreciation & Amortization
The allocation of cost over a fixed asset's useful life in order to match the timing of the
cost of the asset with when it is expected to generate revenue benefits.
Other Operating Expenses / Income
Any operating expenses not allocated to COGS, SG&A, R&D, D&A.
Operating Profit (EBIT)
Earnings before interest and taxes : EBITDA - D&A.
Interest Expense
Amount the company has to pay on debt owed.
Interest Income
A company's income from its cash holdings and investments.
Non-operating income
Items peripheral to core operations. Includes gains/losses on investments and
revaluation of certain financial assets and debt obligations.
Income Tax Expense
The tax liability a company reports on the income statement.
Net Income
EBIT - Net Interest Expense - Other Nonoperating Income - Taxes
Basic earnings per share (EPS)
, Net income / Basic Weighted Average Shares Outstanding
Measures how much of the total current period profits belong to each shareholder.
Diluted EPS
Net income / Diluted Weighted Average Shares Outstanding
Not all income is revenue
Interest income or income from legal settlements. Income NOT from main company
operations.
Percentage of Completion Method
Revenues are recognized on the basis of the percentage of total work completed during
the accounting period.
Completed Contract Method
Rarely used in the U.S., this method allows revenue recognition only once the entire
project has been completed.
Cash accounting
Objectively recognizes revenues when cash is received and records costs when cash is
paid out.
SEC
Securities and Exchange Commission.
FASB
Financial Accounting Standards Board.
GAAP
QUESTIONS WITH ANSWERS VERIFIED 100%
CORRECT
Income Statement
Financial report that depicts the operating performance (profitability) of a company
over a specific period of time.
Net Revenues
Total dollar payments for goods and services that are credited to an income statement
over a particular time period.
Costs of Goods Sold
Represents a company's direct cost of manufacture or procurement of a good or service
that a company sells to generate revenue.
Gross Profit
Revenues - COGS
Selling, General and Administrative (SG&A)
Operating costs not directly associated with production or procurement of a product or
service. These operating costs include payroll, wages, commissions, meal and travel
expenses, etc.
Research and Development (R&D)
A company's activities that are directed at developing new products or procedures.
EBITDA
,Earnings before interest, taxes, depreciation, and amortization ; Gross Profit - SG&A -
R&D.
Depreciation & Amortization
The allocation of cost over a fixed asset's useful life in order to match the timing of the
cost of the asset with when it is expected to generate revenue benefits.
Other Operating Expenses / Income
Any operating expenses not allocated to COGS, SG&A, R&D, D&A.
Operating Profit (EBIT)
Earnings before interest and taxes : EBITDA - D&A.
Interest Expense
Amount the company has to pay on debt owed.
Interest Income
A company's income from its cash holdings and investments.
Non-operating income
Items peripheral to core operations. Includes gains/losses on investments and
revaluation of certain financial assets and debt obligations.
Income Tax Expense
The tax liability a company reports on the income statement.
Net Income
EBIT - Net Interest Expense - Other Nonoperating Income - Taxes
Basic earnings per share (EPS)
, Net income / Basic Weighted Average Shares Outstanding
Measures how much of the total current period profits belong to each shareholder.
Diluted EPS
Net income / Diluted Weighted Average Shares Outstanding
Not all income is revenue
Interest income or income from legal settlements. Income NOT from main company
operations.
Percentage of Completion Method
Revenues are recognized on the basis of the percentage of total work completed during
the accounting period.
Completed Contract Method
Rarely used in the U.S., this method allows revenue recognition only once the entire
project has been completed.
Cash accounting
Objectively recognizes revenues when cash is received and records costs when cash is
paid out.
SEC
Securities and Exchange Commission.
FASB
Financial Accounting Standards Board.
GAAP
