Accounting Principles and Formulas Questions
100% Verified Answers | UPDATED
Lower of Cost or Market (LCM) Principle - ANSWER The company must
report inventories at cost or the current marked price, whichever is lower.
Net Purchase Formula - ANSWER Purchases - Purchase discounts - Purchase
returns and allowances + Freight in = Net Purchases
All-Costs-To-Get-Operating Principle - ANSWER Requires a business to
capitalize all costs necessary to get an asset operating.
Book Value of a Fixed Asset - ANSWER Historical cost of an asset
- Asset's accumulated depreciation
= Book Value
Cash Received on Sale of an Asset - ANSWER Book value + Gain (or - Loss)
= Cash received
Gain or Loss Calculation - ANSWER Amount received - Book value given up =
Gain (or - Loss)
Manufacturing Cost of Goods Sold - ANSWER Direct labor + Direct materials
+ Overhead = Manufacturing cost of goods sold.
Operating Net Income or Operating Income - ANSWER Operating revenue -
Operating expenses = Operating Net Income
New Life Principle - ANSWER If any work on an asset extends the life of that
asset, the cost of that work should be capitalized.
Change-in-Accounting-Estimates Principle - ANSWER Allows business to
change estimates when more accurate information becomes available. Changes
are made for the current and all future years.
Basic Accounting Equation - ANSWER Assets = Liabilities + Owner's Equity
Business Entity - ANSWER The financial statements report about a single
, business. Every business gets its own set of books. Accountants do not mix in the
owner's personal financial information.
Current - ANSWER "Current" liabilities are those debts that must be paid within
one year or one operating cycle, whichever is longer.
Current Ratio - ANSWER Current Assets/Current Liabilities = Current Ratio
Debt Ratio - ANSWER Total Liabilities/Total Assets = Debt Ratio
Alternate Debt Ratio - ANSWER 100% - Equity Ratio = Debt Ratio
Double Entry Accounting - ANSWER Recording business transactions twice:
once to show where the money came from, and another time to show where the
money went.
Equity Ratio - ANSWER Total Equity/Total Assets = Equity Ratio
100% Verified Answers | UPDATED
Lower of Cost or Market (LCM) Principle - ANSWER The company must
report inventories at cost or the current marked price, whichever is lower.
Net Purchase Formula - ANSWER Purchases - Purchase discounts - Purchase
returns and allowances + Freight in = Net Purchases
All-Costs-To-Get-Operating Principle - ANSWER Requires a business to
capitalize all costs necessary to get an asset operating.
Book Value of a Fixed Asset - ANSWER Historical cost of an asset
- Asset's accumulated depreciation
= Book Value
Cash Received on Sale of an Asset - ANSWER Book value + Gain (or - Loss)
= Cash received
Gain or Loss Calculation - ANSWER Amount received - Book value given up =
Gain (or - Loss)
Manufacturing Cost of Goods Sold - ANSWER Direct labor + Direct materials
+ Overhead = Manufacturing cost of goods sold.
Operating Net Income or Operating Income - ANSWER Operating revenue -
Operating expenses = Operating Net Income
New Life Principle - ANSWER If any work on an asset extends the life of that
asset, the cost of that work should be capitalized.
Change-in-Accounting-Estimates Principle - ANSWER Allows business to
change estimates when more accurate information becomes available. Changes
are made for the current and all future years.
Basic Accounting Equation - ANSWER Assets = Liabilities + Owner's Equity
Business Entity - ANSWER The financial statements report about a single
, business. Every business gets its own set of books. Accountants do not mix in the
owner's personal financial information.
Current - ANSWER "Current" liabilities are those debts that must be paid within
one year or one operating cycle, whichever is longer.
Current Ratio - ANSWER Current Assets/Current Liabilities = Current Ratio
Debt Ratio - ANSWER Total Liabilities/Total Assets = Debt Ratio
Alternate Debt Ratio - ANSWER 100% - Equity Ratio = Debt Ratio
Double Entry Accounting - ANSWER Recording business transactions twice:
once to show where the money came from, and another time to show where the
money went.
Equity Ratio - ANSWER Total Equity/Total Assets = Equity Ratio
