HBS CORE (HBS ONLINE CORE) 2026 UPDATE
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTION
What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to be
worth $500,000, it is recorded at $250,000 because that is the price he paid for
it. Answer - Historical Cost Principle
What is the Accounting Equation? Answer - Assets = Liabilities + Equity
What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI
Manufacturing. AQG records the purchase as an increase in inventory and an
increase in accounts payable. AQG feels that they will be able to realize the
value from the inventory and settle the obligation to RSI in the weeks to come.
Answer - "Going Concern" Concept
A "note payable for a bank loan" is an example of a... Answer - Liability
The principle of Conservatism, says that a company should choose
measurement methods that anticipate and record _____________ but don't
anticipate and record _____________. Answer - future losses; future gains
,What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies
to finance start-ups in rural areas. However, the government has cut the
program recently. The company reports this situation in its financial statements
as this might affect the decisions of stakeholders. Answer - Materiality
Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what
type of account? Answer - Expense Account
Sales Revenue & Deferred Revenue decrease with: Debit or Credit? Answer -
Debit
Cost of Goods Sold, Accounts Receivable, Cash: Increase or Decrease with a
Credit Answer - Decrease
These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent Answer - Debit
The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue Answer - Credit
True or False: Transactions are only recorded when there is an exchange of cash
Answer - False: This is true for Cash Basis Accounting, but not for Accrual
Accounting.
The income statement reflects a company's: Answer - Financial performance
over a given period of time
, What represents the net income/(loss) for the year? Answer - The difference
between the revenues/gains and expenses/losses.
Income Statement:
Examples of Permanent Accounts Answer - -CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
Income Statement:
Examples of Temporary Accounts Answer - -COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
Nominal Accounts Answer - Accounts that are reset to zero at the end of each
accounting period. Nominal accounts include all revenue and expense
accounts, and may also be referred to as temporary accounts or Income
Statement accounts. The net balance of nominal accounts is transferred to
retained earnings at the end of each accounting period.
Real Accounts Answer - Accounts which contain cumulative balances since the
inception of the business. The balances in these accounts flow from one
accounting period to the next. Real accounts include all asset, liability, and
owners' equity accounts and may also be referred to as permanent accounts or
Balance Sheet accounts.
QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTION
What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five
years. Although the land under Chad's office building is currently believed to be
worth $500,000, it is recorded at $250,000 because that is the price he paid for
it. Answer - Historical Cost Principle
What is the Accounting Equation? Answer - Assets = Liabilities + Equity
What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI
Manufacturing. AQG records the purchase as an increase in inventory and an
increase in accounts payable. AQG feels that they will be able to realize the
value from the inventory and settle the obligation to RSI in the weeks to come.
Answer - "Going Concern" Concept
A "note payable for a bank loan" is an example of a... Answer - Liability
The principle of Conservatism, says that a company should choose
measurement methods that anticipate and record _____________ but don't
anticipate and record _____________. Answer - future losses; future gains
,What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies
to finance start-ups in rural areas. However, the government has cut the
program recently. The company reports this situation in its financial statements
as this might affect the decisions of stakeholders. Answer - Materiality
Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what
type of account? Answer - Expense Account
Sales Revenue & Deferred Revenue decrease with: Debit or Credit? Answer -
Debit
Cost of Goods Sold, Accounts Receivable, Cash: Increase or Decrease with a
Credit Answer - Decrease
These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent Answer - Debit
The accounts increase with a debit or credit:
Sales Revenue, Deferred Revenue Answer - Credit
True or False: Transactions are only recorded when there is an exchange of cash
Answer - False: This is true for Cash Basis Accounting, but not for Accrual
Accounting.
The income statement reflects a company's: Answer - Financial performance
over a given period of time
, What represents the net income/(loss) for the year? Answer - The difference
between the revenues/gains and expenses/losses.
Income Statement:
Examples of Permanent Accounts Answer - -CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
Income Statement:
Examples of Temporary Accounts Answer - -COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
Nominal Accounts Answer - Accounts that are reset to zero at the end of each
accounting period. Nominal accounts include all revenue and expense
accounts, and may also be referred to as temporary accounts or Income
Statement accounts. The net balance of nominal accounts is transferred to
retained earnings at the end of each accounting period.
Real Accounts Answer - Accounts which contain cumulative balances since the
inception of the business. The balances in these accounts flow from one
accounting period to the next. Real accounts include all asset, liability, and
owners' equity accounts and may also be referred to as permanent accounts or
Balance Sheet accounts.
