ACCOUNTING CRASH COURSE - WALL STREET EXAM 2025/2026
QUESTIONS WITH SOLUTIONS GRADED A+
Ex.) Interest income earned from investments, or income received from a legal
settlement.
✔✔Receiving Cash is recognized as revenue - ✔✔-False, does not constitute revenue.
(Accrual Accounting)
✔✔Revenue Recognition: Multiple Deliverables - ✔✔-For sales of bundled products,
companies should assign individual values to each of the bundled components.
*Especially relevant in the software industry (bundled hardware)
✔✔Revenue Recognition: Long-term projects - ✔✔-1.) *Percentage of Completion
Method*: Revenues are recognized on the basis of the percentage of total work
completed during the accounting period
-2.) *Completed Contract Method*:
Rarely used in U.S., allows revenue recognition only once the entire project has been
completed.
✔✔Pure of Cash Accounting - ✔✔-To track movement of cash
✔✔Cash vs Accrual Accounting: Revenue Recognition - ✔✔C: when cash is received
A: economic exchange is almost or fully complete
✔✔Cash vs Accrual Accounting: Expense Recognition - ✔✔C: When cash is paid out -
could be in a different period from revenue recognition
A: Expenses associated with a product must be recorded during the same period as
revenue generated from it (*Matching Principle*)
✔✔Cash vs Accrual Accounting: Judgement - ✔✔C: movement of cash is *objective*
A: Allocation of revenues are expenses to different periods is *subjective*
✔✔Revenue Manipulation - ✔✔-subjectivity of accrual accounting allows for "wiggle
room" that creates potential for manipulation in the form of shifting revenues from one
period to another.
✔✔When you see the word "margin" after some profit measure, what does it mean? -
✔✔-You simply divide the profit measure by the revenue
, ✔✔Examples of COGS - ✔✔-Merchandise Inventory
-Manufactured goods inventory
---> Raw material costs
---> Direct labor costs
---> Factory overhead
-Shipping and delivery costs
-Depreciation of Fixed Assets
✔✔Examples of SG&A - ✔✔-A store lease expense for a retail business
-Salaries and commissions of sales people/cashiers
-Marketing & advertising expenses
-Administrative, IT, and office support staff
-Equipment used for selling (a cash register)
-Executive Salaries
-Legal expenses
✔✔Depreciation Expense - ✔✔-quantifies the wear and tear (from use & passage of
time) of the physical asset through a systematic decrease (depreciation) of the assets'
book (historical) value
✔✔Useful Life of Fixed Assets - ✔✔-Plants and buildings (15-40 years)
-Machinery & equipment (3-20 years)
-Furniture & Fixtures (5-10 years)
-Computer software & hardware (3-5 years)
*Land is a fixed asset but is NOT depreciated*
✔✔Where is the depreciation expense on the Income Statement? - ✔✔-Included within
COGS or SG&A, depending on whether the asset being depreciated is directly tied with
manufacture or procurement or tied to something not directly tied like selling or
marketing.
✔✔Income Statement Profits - ✔✔-are reduced every year by depreciation expense
QUESTIONS WITH SOLUTIONS GRADED A+
Ex.) Interest income earned from investments, or income received from a legal
settlement.
✔✔Receiving Cash is recognized as revenue - ✔✔-False, does not constitute revenue.
(Accrual Accounting)
✔✔Revenue Recognition: Multiple Deliverables - ✔✔-For sales of bundled products,
companies should assign individual values to each of the bundled components.
*Especially relevant in the software industry (bundled hardware)
✔✔Revenue Recognition: Long-term projects - ✔✔-1.) *Percentage of Completion
Method*: Revenues are recognized on the basis of the percentage of total work
completed during the accounting period
-2.) *Completed Contract Method*:
Rarely used in U.S., allows revenue recognition only once the entire project has been
completed.
✔✔Pure of Cash Accounting - ✔✔-To track movement of cash
✔✔Cash vs Accrual Accounting: Revenue Recognition - ✔✔C: when cash is received
A: economic exchange is almost or fully complete
✔✔Cash vs Accrual Accounting: Expense Recognition - ✔✔C: When cash is paid out -
could be in a different period from revenue recognition
A: Expenses associated with a product must be recorded during the same period as
revenue generated from it (*Matching Principle*)
✔✔Cash vs Accrual Accounting: Judgement - ✔✔C: movement of cash is *objective*
A: Allocation of revenues are expenses to different periods is *subjective*
✔✔Revenue Manipulation - ✔✔-subjectivity of accrual accounting allows for "wiggle
room" that creates potential for manipulation in the form of shifting revenues from one
period to another.
✔✔When you see the word "margin" after some profit measure, what does it mean? -
✔✔-You simply divide the profit measure by the revenue
, ✔✔Examples of COGS - ✔✔-Merchandise Inventory
-Manufactured goods inventory
---> Raw material costs
---> Direct labor costs
---> Factory overhead
-Shipping and delivery costs
-Depreciation of Fixed Assets
✔✔Examples of SG&A - ✔✔-A store lease expense for a retail business
-Salaries and commissions of sales people/cashiers
-Marketing & advertising expenses
-Administrative, IT, and office support staff
-Equipment used for selling (a cash register)
-Executive Salaries
-Legal expenses
✔✔Depreciation Expense - ✔✔-quantifies the wear and tear (from use & passage of
time) of the physical asset through a systematic decrease (depreciation) of the assets'
book (historical) value
✔✔Useful Life of Fixed Assets - ✔✔-Plants and buildings (15-40 years)
-Machinery & equipment (3-20 years)
-Furniture & Fixtures (5-10 years)
-Computer software & hardware (3-5 years)
*Land is a fixed asset but is NOT depreciated*
✔✔Where is the depreciation expense on the Income Statement? - ✔✔-Included within
COGS or SG&A, depending on whether the asset being depreciated is directly tied with
manufacture or procurement or tied to something not directly tied like selling or
marketing.
✔✔Income Statement Profits - ✔✔-are reduced every year by depreciation expense
