ACC 131 Exam Questions and Answers Fully Solved Latest Update 2025-2026
Financial Accounting - Answers process of identifying, measuring, and recording information
about the resources of a business, claims against those resources, and how efficiently and
effectively the resources are used. Communicated through periodic financial statements so that
creditors and investors (external decision makers) can make decisions about providing
resources based on the likelihood of receiving a return
Asset - Answers resources the company owns or has a right to of the company that provide
benefit in the future.
Liability - Answers an obligation the company must satisfy (or pay)in the future, usually an
amount owed by the company
Assets= Liabilities + SE
Stockholders Equity - Answers Corporation
A= L + SE
SE= stock + RE
Stock - Answers amounts invested into the company in exchange for shares of ownership
Retained Earnings - Answers the amount of net income or earning since the company began
that has been kept inside the company
RE= BRE+ NI - D
Beginning retained earnings - Answers retained earnings from all prior periods
Net Income - Answers Earnings
NI= Revenues -Expenses
Dividends - Answers distribution of earnings to stockholders. These amounts are paid
periodically by corporation to its stockholders as a return of their invested capital. Represent a
distribution of retained earnings, not an expense
Revenues - Answers Increase in assets ( financial benefit earned, could also be a decrease in
liabilities) from the sale of goods or services to a customer
Earned - Answers product or service provided
Expenses - Answers Cost of assets consumed, or liabilities created, in the operation of a
business (during the current period)
, Incurred - Answers Resource used
Financial reporting concepts - Answers qualities of useful information, assumptions, and
principles
Revenue recognition principle - Answers expenses are recorded when incurred (when a resource
is used) regardless of when cash is received. Resources are being used in order to generate
revenues, so the matching principle says expenses should be recorded in the same time period
(matched) with the revenues they help generate
Economic entity assumption - Answers activities of the business entity be kept separate from
the activities of the owner(s) and other economic entities
Time period assumption - Answers the life of the business can be divided into artificial time
periods (month, quarter, year)
qualities of useful information - Answers fundamental characteristics are relevance and faith
representation
relevance - Answers make a difference in a decision
faithful representation - Answers reflects what really existed or happened, accurate reflection of
the underlying activities, accurately portray the activities of the company
Accounting Equation - Answers Asset= Liabilities+ stockholders' equity
Expanded Accounting Equation - Answers Assets = Liabilities + Stock + Beginning Retained
Earnings + Revenues - Expenses - Dividends
Scenario:
Assets Liabilities Equity
1. $124,200 $70,300 A
2. $205,700 B $84,100
3. C $83,400 $97,600 - Answers A. 124,200-70300= $53900
B.205,700- 84100=121600
C.83400+ 97600= $181,000
Accounts Payable - Answers liability
amounts that must be paid to suppliers in the future for inventory or supplies received but not
paid for
Financial Accounting - Answers process of identifying, measuring, and recording information
about the resources of a business, claims against those resources, and how efficiently and
effectively the resources are used. Communicated through periodic financial statements so that
creditors and investors (external decision makers) can make decisions about providing
resources based on the likelihood of receiving a return
Asset - Answers resources the company owns or has a right to of the company that provide
benefit in the future.
Liability - Answers an obligation the company must satisfy (or pay)in the future, usually an
amount owed by the company
Assets= Liabilities + SE
Stockholders Equity - Answers Corporation
A= L + SE
SE= stock + RE
Stock - Answers amounts invested into the company in exchange for shares of ownership
Retained Earnings - Answers the amount of net income or earning since the company began
that has been kept inside the company
RE= BRE+ NI - D
Beginning retained earnings - Answers retained earnings from all prior periods
Net Income - Answers Earnings
NI= Revenues -Expenses
Dividends - Answers distribution of earnings to stockholders. These amounts are paid
periodically by corporation to its stockholders as a return of their invested capital. Represent a
distribution of retained earnings, not an expense
Revenues - Answers Increase in assets ( financial benefit earned, could also be a decrease in
liabilities) from the sale of goods or services to a customer
Earned - Answers product or service provided
Expenses - Answers Cost of assets consumed, or liabilities created, in the operation of a
business (during the current period)
, Incurred - Answers Resource used
Financial reporting concepts - Answers qualities of useful information, assumptions, and
principles
Revenue recognition principle - Answers expenses are recorded when incurred (when a resource
is used) regardless of when cash is received. Resources are being used in order to generate
revenues, so the matching principle says expenses should be recorded in the same time period
(matched) with the revenues they help generate
Economic entity assumption - Answers activities of the business entity be kept separate from
the activities of the owner(s) and other economic entities
Time period assumption - Answers the life of the business can be divided into artificial time
periods (month, quarter, year)
qualities of useful information - Answers fundamental characteristics are relevance and faith
representation
relevance - Answers make a difference in a decision
faithful representation - Answers reflects what really existed or happened, accurate reflection of
the underlying activities, accurately portray the activities of the company
Accounting Equation - Answers Asset= Liabilities+ stockholders' equity
Expanded Accounting Equation - Answers Assets = Liabilities + Stock + Beginning Retained
Earnings + Revenues - Expenses - Dividends
Scenario:
Assets Liabilities Equity
1. $124,200 $70,300 A
2. $205,700 B $84,100
3. C $83,400 $97,600 - Answers A. 124,200-70300= $53900
B.205,700- 84100=121600
C.83400+ 97600= $181,000
Accounts Payable - Answers liability
amounts that must be paid to suppliers in the future for inventory or supplies received but not
paid for
