Financial Accounting (CLEP) Exam with || || || || ||
verified detailed answers || ||
GAAP - correct answer✔✔Generally Accepted Accounting Principles
|| || || || || ||
FASB - correct answer✔✔Financial Accounting Standards Board; develops GAAP for public
|| || || || || || || || || || ||
companies.
Conservative Principle - correct answer✔✔The accounting principle requires accountants to || || || || || || || || || ||
resolve financial statement uncertainty in the least favorable way.
|| || || || || || || ||
LCM - correct answer✔✔Lower of cost or market.
|| || || || || || ||
- An inventory valuation method.
|| || || ||
- inventory is purchased by a company, then, over time, the value of the inventory may depreciate
|| || || || || || || || || || || || || || || || ||
or appreciate. To increase the reliability of financial statements, the changing value of inventory,
|| || || || || || || || || || || || || ||
to an extent, must be accounted for.
|| || || || || ||
Going Concern Principle - correct answer✔✔the life of the business is assumed to be continuous,
|| || || || || || || || || || || || || || ||
and its records are kept on that basis
|| || || || || || ||
Historical Cost Principle - correct answer✔✔An accounting principle that states that companies
|| || || || || || || || || || || ||
should record assets at their historical cost.
|| || || || || ||
Objectivity Principle - correct answer✔✔The accounting principle that requires business
|| || || || || || || || || ||
transactions to be recorded using the best objective evidence || || || || || || || ||
Monetary Unit Principle - correct answer✔✔Principle that assumes transactions and events can
|| || || || || || || || || || || ||
be expressed in money units.
|| || || ||
,Financial Management - correct answer✔✔the job of managing a firm's resources so it can meet
|| || || || || || || || || || || || || || ||
its goals and objectives. Top Priority
|| || || || ||
Financial Statements - correct answer✔✔periodic reports published by the company for the
|| || || || || || || || || || || ||
purpose of providing information to external users. Helps Owner's, Investors, and creditors.
|| || || || || || || || || || ||
Balance Sheet - correct answer✔✔A financial statement that reports assets, liabilities, and
|| || || || || || || || || || || ||
owner's equity on a specific date. || || || || ||
income statement - correct answer✔✔A financial statement showing the revenue and expenses
|| || || || || || || || || || || ||
for a fiscal period. Results of Business ops.
|| || || || || || ||
Statement of Cash Flows - correct answer✔✔A financial statement that provides financial
|| || || || || || || || || || || ||
information about the cash receipts and cash payments of a business for a specific period of time.
|| || || || || || || || || || || || || || || ||
Full Disclosure - correct answer✔✔providing all information necessary for consumers to make
|| || || || || || || || || || || ||
an informed decision
|| ||
Capital Allocation - correct answer✔✔the choice between risky and risk-free assets
|| || || || || || || || || ||
standard setting - correct answer✔✔(promises) || || || ||
FRS - correct answer✔✔Financial Reporting Standard
|| || || || ||
Expectation Gap - correct answer✔✔what the public thinks accountants should do and what
|| || || || || || || || || || || || ||
accountants think they can do || || || ||
SOX - correct answer✔✔Sarbanes-Oxley act of 2002: enacted in response to the financial
|| || || || || || || || || || || || ||
scandals to protect shareholders and the general public from accounting errors and fraudulent
|| || || || || || || || || || || || ||
practices.
, Ethics in Accounting - correct answer✔✔accountants can't be biased!
|| || || || || || || ||
-SEC can punish legally
|| || ||
-AICPA can strip license || || ||
-business community can make you lost credibility which can really damage business
|| || || || || || || || || || ||
have issues with this bc of making professional judgment decisions
|| || || || || || || || ||
SEC - correct answer✔✔Securities and Exchange Commission
|| || || || || ||
Matching Principle - correct answer✔✔Guides accounting for expenses, ensures that all expenses
|| || || || || || || || || || ||
are recorded when they are incurred during the period, and matches those expenses against the
|| || || || || || || || || || || || || || || ||
revenues of the period. || || ||
double-entry accounting - correct answer✔✔principle requiring that all transactions yet recorded
|| || || || || || || || || || ||
twice; thus allowing for checks and balances and, therefore, equal debits and credits.
|| || || || || || || || || || || ||
Transaction Analysis - correct answer✔✔the process of studying a transaction to determine its
|| || || || || || || || || || || || ||
economic effect on the business in terms of the accounting equation
|| || || || || || || || || ||
Accounting Equation - correct answer✔✔An equation showing the relationship among assets,
|| || || || || || || || || || ||
liabilities, and owner's equity || || ||
Assets - correct answer✔✔resources owned by a business for future use. Liabilities + Owner's
|| || || || || || || || || || || || || ||
Equity
Liabilities - correct answer✔✔debts that you owe. Assets - Owner's Equity
|| || || || || || || || || ||
Owner's Equity - correct answer✔✔the owner's claims to the assets of the business.
|| || || || || || || || || || || || ||
Equation: Assets - Liabilities || || ||
verified detailed answers || ||
GAAP - correct answer✔✔Generally Accepted Accounting Principles
|| || || || || ||
FASB - correct answer✔✔Financial Accounting Standards Board; develops GAAP for public
|| || || || || || || || || || ||
companies.
Conservative Principle - correct answer✔✔The accounting principle requires accountants to || || || || || || || || || ||
resolve financial statement uncertainty in the least favorable way.
|| || || || || || || ||
LCM - correct answer✔✔Lower of cost or market.
|| || || || || || ||
- An inventory valuation method.
|| || || ||
- inventory is purchased by a company, then, over time, the value of the inventory may depreciate
|| || || || || || || || || || || || || || || || ||
or appreciate. To increase the reliability of financial statements, the changing value of inventory,
|| || || || || || || || || || || || || ||
to an extent, must be accounted for.
|| || || || || ||
Going Concern Principle - correct answer✔✔the life of the business is assumed to be continuous,
|| || || || || || || || || || || || || || ||
and its records are kept on that basis
|| || || || || || ||
Historical Cost Principle - correct answer✔✔An accounting principle that states that companies
|| || || || || || || || || || || ||
should record assets at their historical cost.
|| || || || || ||
Objectivity Principle - correct answer✔✔The accounting principle that requires business
|| || || || || || || || || ||
transactions to be recorded using the best objective evidence || || || || || || || ||
Monetary Unit Principle - correct answer✔✔Principle that assumes transactions and events can
|| || || || || || || || || || || ||
be expressed in money units.
|| || || ||
,Financial Management - correct answer✔✔the job of managing a firm's resources so it can meet
|| || || || || || || || || || || || || || ||
its goals and objectives. Top Priority
|| || || || ||
Financial Statements - correct answer✔✔periodic reports published by the company for the
|| || || || || || || || || || || ||
purpose of providing information to external users. Helps Owner's, Investors, and creditors.
|| || || || || || || || || || ||
Balance Sheet - correct answer✔✔A financial statement that reports assets, liabilities, and
|| || || || || || || || || || || ||
owner's equity on a specific date. || || || || ||
income statement - correct answer✔✔A financial statement showing the revenue and expenses
|| || || || || || || || || || || ||
for a fiscal period. Results of Business ops.
|| || || || || || ||
Statement of Cash Flows - correct answer✔✔A financial statement that provides financial
|| || || || || || || || || || || ||
information about the cash receipts and cash payments of a business for a specific period of time.
|| || || || || || || || || || || || || || || ||
Full Disclosure - correct answer✔✔providing all information necessary for consumers to make
|| || || || || || || || || || || ||
an informed decision
|| ||
Capital Allocation - correct answer✔✔the choice between risky and risk-free assets
|| || || || || || || || || ||
standard setting - correct answer✔✔(promises) || || || ||
FRS - correct answer✔✔Financial Reporting Standard
|| || || || ||
Expectation Gap - correct answer✔✔what the public thinks accountants should do and what
|| || || || || || || || || || || || ||
accountants think they can do || || || ||
SOX - correct answer✔✔Sarbanes-Oxley act of 2002: enacted in response to the financial
|| || || || || || || || || || || || ||
scandals to protect shareholders and the general public from accounting errors and fraudulent
|| || || || || || || || || || || || ||
practices.
, Ethics in Accounting - correct answer✔✔accountants can't be biased!
|| || || || || || || ||
-SEC can punish legally
|| || ||
-AICPA can strip license || || ||
-business community can make you lost credibility which can really damage business
|| || || || || || || || || || ||
have issues with this bc of making professional judgment decisions
|| || || || || || || || ||
SEC - correct answer✔✔Securities and Exchange Commission
|| || || || || ||
Matching Principle - correct answer✔✔Guides accounting for expenses, ensures that all expenses
|| || || || || || || || || || ||
are recorded when they are incurred during the period, and matches those expenses against the
|| || || || || || || || || || || || || || || ||
revenues of the period. || || ||
double-entry accounting - correct answer✔✔principle requiring that all transactions yet recorded
|| || || || || || || || || || ||
twice; thus allowing for checks and balances and, therefore, equal debits and credits.
|| || || || || || || || || || || ||
Transaction Analysis - correct answer✔✔the process of studying a transaction to determine its
|| || || || || || || || || || || || ||
economic effect on the business in terms of the accounting equation
|| || || || || || || || || ||
Accounting Equation - correct answer✔✔An equation showing the relationship among assets,
|| || || || || || || || || || ||
liabilities, and owner's equity || || ||
Assets - correct answer✔✔resources owned by a business for future use. Liabilities + Owner's
|| || || || || || || || || || || || || ||
Equity
Liabilities - correct answer✔✔debts that you owe. Assets - Owner's Equity
|| || || || || || || || || ||
Owner's Equity - correct answer✔✔the owner's claims to the assets of the business.
|| || || || || || || || || || || || ||
Equation: Assets - Liabilities || || ||
