WALL STREET PREP: EXCEL CRASH COURSE ACTUAL
EXAM PRACTICE QUESTIONS WITH ANSWERS
VERIFIED 100% CORRECT
Four Underlying Principles in Accounting
(1) Historical Cost
(2) Accrual Accounting: Revenue Recognition
(3) Accrual Accounting: Matching Principle
(4) Full Disclosure
Constraint 1: Estimates & Judgments
Certain measurements cannot be performed completely accurately, and must therefore
utilize conservative estimates and judgments
Constraint 2: Materiality
Inclusion and disclosure of financial transactions in financial statements hinge on their
size and effect on the company performing them
Note: Materiality varies across different entities
Constraint 3: Consistency
Each company has to prepare financial statements using measurement techniques and
assumptions which are consistent from one period to another
Constraint 4: Conservatism
Financial statements should be prepared with a downward measurement bias
Assets and revenues should not be overstated, while liabilities and expenses should not
be understated
,Four Underlying Constraints in Accounting
(1) Estimates & judgments
(2) Materiality
(3) Consistency
(4) Conservatism
Summary of Accounting Assumptions, Principles, Constraints
Most important are the historical cost, revenue recognition, and matching principles
Financial Reporting Overview
Presented in the companies' financial reports and standardized by accounting
Companies must file periodic financial reports with the SEC
Finding Financial Reports
On the sec.gov website
UK: companieshoues.gov.uk
Canada: sedar.com
Also, company websites and financial websites and services
Form 10-K (Annual Filing)
Publicly traded companies must file the 10-K at the end of each fiscal year
Includes a thorough overview of their businesses and finances, as well as their financial
statements
Must be filed within 60-90 days within year end, depending on filer's status (large
accelerated (60)/accelerated/non-accelerated filer (90))
Why is the 10-K important?
,Required annual filing that provides the most detailed overview of companies' financial
operations and regulations governing them
Annual Report vs. 10-K
Form 10-Q (Quarterly)
At the end of each quarter of their fiscal year (for the first three quarters), publicly-
traded companies file a report with the SEC which includes financial statements and
non-financial data
Must be filed within 40-45 days of quarter end
10-K vs. 10-Q
Form 8-K
A required filing any time a company undergoes or announces a materially significant
event such as an earnings press release
Usually filed within 4 days of the event
Form 14A (Proxy Statement)
A required filing prior to a company's annual shareholder meeting
Contains detailed information about top officers and their compensations
Often solicits shareholder votes (proxies) for Board nominees and other important
matters
Other Financial Reports
S-1, S-4, and 20-F
Part 1 of the 10-K
Part 2 of the 10-K
The red meat of the 10-K
, Parts 3 and 4 of the 10-K
Where can you find the latest share count on a 10-K?
At the bottom of the cover page
Business Section of the 10-K
Allows you to get to know a company
Generally Includes: Company background, business strategy, product descriptions,
markets and distribution, competition, distribution networks
MD&A Section of the 10-K (Item 7)
Reviews what happened during the year, what their expectations are, etc.
Selected Financial Data of the 10-K (Item 6)
Includes the most important financial highlights
Financial Statements Section of the 10-K (Item 8)
Includes: B/S, CFS, I/S, etc.
T/F: GAAP requires that firms show recorded values for acquired intangible assets
such as patents and trademarks on their financial statements
True!
GAAP requires that firms only show measurable activities, such as the value of acquired
intangible assets
Assets such as employee, customer loyalty, and internally-developed trademarks are not
shown on financial statements
The Income Statement is designed to measure...
EXAM PRACTICE QUESTIONS WITH ANSWERS
VERIFIED 100% CORRECT
Four Underlying Principles in Accounting
(1) Historical Cost
(2) Accrual Accounting: Revenue Recognition
(3) Accrual Accounting: Matching Principle
(4) Full Disclosure
Constraint 1: Estimates & Judgments
Certain measurements cannot be performed completely accurately, and must therefore
utilize conservative estimates and judgments
Constraint 2: Materiality
Inclusion and disclosure of financial transactions in financial statements hinge on their
size and effect on the company performing them
Note: Materiality varies across different entities
Constraint 3: Consistency
Each company has to prepare financial statements using measurement techniques and
assumptions which are consistent from one period to another
Constraint 4: Conservatism
Financial statements should be prepared with a downward measurement bias
Assets and revenues should not be overstated, while liabilities and expenses should not
be understated
,Four Underlying Constraints in Accounting
(1) Estimates & judgments
(2) Materiality
(3) Consistency
(4) Conservatism
Summary of Accounting Assumptions, Principles, Constraints
Most important are the historical cost, revenue recognition, and matching principles
Financial Reporting Overview
Presented in the companies' financial reports and standardized by accounting
Companies must file periodic financial reports with the SEC
Finding Financial Reports
On the sec.gov website
UK: companieshoues.gov.uk
Canada: sedar.com
Also, company websites and financial websites and services
Form 10-K (Annual Filing)
Publicly traded companies must file the 10-K at the end of each fiscal year
Includes a thorough overview of their businesses and finances, as well as their financial
statements
Must be filed within 60-90 days within year end, depending on filer's status (large
accelerated (60)/accelerated/non-accelerated filer (90))
Why is the 10-K important?
,Required annual filing that provides the most detailed overview of companies' financial
operations and regulations governing them
Annual Report vs. 10-K
Form 10-Q (Quarterly)
At the end of each quarter of their fiscal year (for the first three quarters), publicly-
traded companies file a report with the SEC which includes financial statements and
non-financial data
Must be filed within 40-45 days of quarter end
10-K vs. 10-Q
Form 8-K
A required filing any time a company undergoes or announces a materially significant
event such as an earnings press release
Usually filed within 4 days of the event
Form 14A (Proxy Statement)
A required filing prior to a company's annual shareholder meeting
Contains detailed information about top officers and their compensations
Often solicits shareholder votes (proxies) for Board nominees and other important
matters
Other Financial Reports
S-1, S-4, and 20-F
Part 1 of the 10-K
Part 2 of the 10-K
The red meat of the 10-K
, Parts 3 and 4 of the 10-K
Where can you find the latest share count on a 10-K?
At the bottom of the cover page
Business Section of the 10-K
Allows you to get to know a company
Generally Includes: Company background, business strategy, product descriptions,
markets and distribution, competition, distribution networks
MD&A Section of the 10-K (Item 7)
Reviews what happened during the year, what their expectations are, etc.
Selected Financial Data of the 10-K (Item 6)
Includes the most important financial highlights
Financial Statements Section of the 10-K (Item 8)
Includes: B/S, CFS, I/S, etc.
T/F: GAAP requires that firms show recorded values for acquired intangible assets
such as patents and trademarks on their financial statements
True!
GAAP requires that firms only show measurable activities, such as the value of acquired
intangible assets
Assets such as employee, customer loyalty, and internally-developed trademarks are not
shown on financial statements
The Income Statement is designed to measure...
