MGT 8803 - Accounting - Module 1 UPDATED ACTUAL
Questions and CORRECT Answers
What are the three forms of business? Proprietorship, partnership, and corporations
A proprietorship/partnership has limited False
liability?
What are the accounting assumptions? Separate entity, consistent unit of measurement (currency),
going concern, periodicity, and materiality
Materiality only information that would influence the decisions of a reliant
party need be disclosed
Periodicity presume arbitrarily picked time period and repeat financial
results of that time
Going Concern the presumption that the entity will continue to operate in the
future
Who uses financial statements? investors, creditors, financial analysts, gov't agencies
GAAP Generally Accepted Accounting Principles. The standards and
rules that accountants follow while recording and reporting
financial activities.
Financial Accounting Standards Board the private board that establishes the generally accepted
(FASB) accounting principles used in the practice of financial
accounting
IFRS (International Financial Reporting A standardized set of rules and practices in business
Standards) accounting used in many countries as an alternative to US
GAAP.
, What are the qualities of financial Understandability, timeliness, full disclosure, comparability,
statements? objectivity, decision relevance
Full Disclosure Principle requires that companies disclose all circumstances and events
that would make a difference to financial statement users
What are the three types of financial Balance sheet, income statement, statement of cash flows
statements? (gone over so far)
Why is accuracy not a quality of a financial Too much judgment is involved
statement?
Which quality of financial statements Decision relevance
conflicts with objectivity?
What are the three categories of a balance assets, liabilities, and owner's equity
sheet?
What is the accounting equation? Assets = Liabilities + Owner's Equity
Accounting equation details - what is the resources available
left side?
Accounting equation details - what is the sources of funding provided by creditors/who has claim to
right side? assets
Assets resources owned or rights to receive resources
What are the categories of assets? physical, intangible, legal rights
What are some common asset accounts? cash. AR, buildings & equipment, inventory, copyright/patents
Historical Cost Principle An accounting principle that states that companies should
record assets at their cost.
Liabilities obligations owed to creditors in form of money or
good/services
What are some common liability accounts? Accounts payable, notes payable, accrued salaries, deferred
revenues
What is a current asset? Cash plus other assets that are expected to be sold or
converted to cash during the current operating cycle (usually
within a year)
What is a current liability? A liability expected to be paid within 12 months or less
What are the two components of owners capital stock (what company received when selling shares)
equity? and retained earnings (accumulated earnings less dividends)
Questions and CORRECT Answers
What are the three forms of business? Proprietorship, partnership, and corporations
A proprietorship/partnership has limited False
liability?
What are the accounting assumptions? Separate entity, consistent unit of measurement (currency),
going concern, periodicity, and materiality
Materiality only information that would influence the decisions of a reliant
party need be disclosed
Periodicity presume arbitrarily picked time period and repeat financial
results of that time
Going Concern the presumption that the entity will continue to operate in the
future
Who uses financial statements? investors, creditors, financial analysts, gov't agencies
GAAP Generally Accepted Accounting Principles. The standards and
rules that accountants follow while recording and reporting
financial activities.
Financial Accounting Standards Board the private board that establishes the generally accepted
(FASB) accounting principles used in the practice of financial
accounting
IFRS (International Financial Reporting A standardized set of rules and practices in business
Standards) accounting used in many countries as an alternative to US
GAAP.
, What are the qualities of financial Understandability, timeliness, full disclosure, comparability,
statements? objectivity, decision relevance
Full Disclosure Principle requires that companies disclose all circumstances and events
that would make a difference to financial statement users
What are the three types of financial Balance sheet, income statement, statement of cash flows
statements? (gone over so far)
Why is accuracy not a quality of a financial Too much judgment is involved
statement?
Which quality of financial statements Decision relevance
conflicts with objectivity?
What are the three categories of a balance assets, liabilities, and owner's equity
sheet?
What is the accounting equation? Assets = Liabilities + Owner's Equity
Accounting equation details - what is the resources available
left side?
Accounting equation details - what is the sources of funding provided by creditors/who has claim to
right side? assets
Assets resources owned or rights to receive resources
What are the categories of assets? physical, intangible, legal rights
What are some common asset accounts? cash. AR, buildings & equipment, inventory, copyright/patents
Historical Cost Principle An accounting principle that states that companies should
record assets at their cost.
Liabilities obligations owed to creditors in form of money or
good/services
What are some common liability accounts? Accounts payable, notes payable, accrued salaries, deferred
revenues
What is a current asset? Cash plus other assets that are expected to be sold or
converted to cash during the current operating cycle (usually
within a year)
What is a current liability? A liability expected to be paid within 12 months or less
What are the two components of owners capital stock (what company received when selling shares)
equity? and retained earnings (accumulated earnings less dividends)
