MGT 8803 - Accounting Exam UPDATED ACTUAL Questions
and CORRECT Answers
What's the purpose of Financial Accounting? To provide meaningful quantitative financial information
regarding an entity's activities to decision makers
What ISN'T accounting? It's not Tax information or Managerial/Business operation
information
Who are the decision makers in businesses Shareholders (Owners)
and what are their incentives? Get Value through stock price and Dividends
Debt Holders (Creditors)
Get value by interest payments
Managers
Want to keep their job and get incentives
Investment Analysts and information intermediaries
Customers/Strategic partners
Want businesses to do well so they can get continued support
and future products
What are the two things that make Relevance and Faithful Representation
information useful in accounting? Also want it to be timely and relational so it can be
compared
What is GAAP? Generally Accepted Accounting Principles
Where do Financial Accounting Rules
(Standards) come from?
What are some risks in accounting? -Financial statements depend on countless estimates
-Earnings Management/Manipulation
, Who oversees Financial Accounting? • The Securities and Exchange Commission (SEC) oversees all
publicly traded companies
• External Audits - American institute of Certified Public
Accountants (AICPA)
• Securities Law
What is Securities Law Liberal laws that allow people to sue companys for having
bad/misleading information that negatively affect you
What is Capital Allocation? And how does How a company uses its money
Accounting affect it? Accounting is the primary source of information fro decision
makers. Accounting provides information so that investors can
put money towards good ideas/companies/people.
What are the requred Financial statements • Balance Sheet
of all publicly owned companies? • Income Statement
• Statement of Shareholders' Equity
• Statement of Cash flows
• Statement of Comprehensive Income
What are the two most useful Financial • Balance Sheet
statements of all publicly owned • Income Statement
companies?
What are other ways decision makers can • Financial Statement Footnotes
get information beyond financial • Independent Auditor Report
statements? • Management Discussion and Analysis (MD&A)
• Press Release
Why are Financial Statement footnbores They can sometimes have the most useful information/details,
important? usually much longer than the financial statements
Balance Sheet - What is a Balance Sheet? A balance sheet describes the sources and uses of funds of a
firm at a point in time.
Balance Sheet - What is it useful for? • Evaluating capital structure (Where the money came from)
• Assessing risk and future cash flows
Balance Sheet - What are Assets? Economic resources that are owned or controlled by a
company that have future
economic benefit
Balance Sheet - To be reported on a o Be owned (or controlled) by the company
balance sheet, an asset must... (2 things) o Must possess expected future economic benefits
Balance Sheet - Examples of assets include: Cash, Accounts Receivables (A/R), Inventory, Land,
Buildings, Equipment, Copyrights, and Investments.
Balance Sheet - What is not an Asset? a strong management team, a well-designed supply chain, or
superior technology.
and CORRECT Answers
What's the purpose of Financial Accounting? To provide meaningful quantitative financial information
regarding an entity's activities to decision makers
What ISN'T accounting? It's not Tax information or Managerial/Business operation
information
Who are the decision makers in businesses Shareholders (Owners)
and what are their incentives? Get Value through stock price and Dividends
Debt Holders (Creditors)
Get value by interest payments
Managers
Want to keep their job and get incentives
Investment Analysts and information intermediaries
Customers/Strategic partners
Want businesses to do well so they can get continued support
and future products
What are the two things that make Relevance and Faithful Representation
information useful in accounting? Also want it to be timely and relational so it can be
compared
What is GAAP? Generally Accepted Accounting Principles
Where do Financial Accounting Rules
(Standards) come from?
What are some risks in accounting? -Financial statements depend on countless estimates
-Earnings Management/Manipulation
, Who oversees Financial Accounting? • The Securities and Exchange Commission (SEC) oversees all
publicly traded companies
• External Audits - American institute of Certified Public
Accountants (AICPA)
• Securities Law
What is Securities Law Liberal laws that allow people to sue companys for having
bad/misleading information that negatively affect you
What is Capital Allocation? And how does How a company uses its money
Accounting affect it? Accounting is the primary source of information fro decision
makers. Accounting provides information so that investors can
put money towards good ideas/companies/people.
What are the requred Financial statements • Balance Sheet
of all publicly owned companies? • Income Statement
• Statement of Shareholders' Equity
• Statement of Cash flows
• Statement of Comprehensive Income
What are the two most useful Financial • Balance Sheet
statements of all publicly owned • Income Statement
companies?
What are other ways decision makers can • Financial Statement Footnotes
get information beyond financial • Independent Auditor Report
statements? • Management Discussion and Analysis (MD&A)
• Press Release
Why are Financial Statement footnbores They can sometimes have the most useful information/details,
important? usually much longer than the financial statements
Balance Sheet - What is a Balance Sheet? A balance sheet describes the sources and uses of funds of a
firm at a point in time.
Balance Sheet - What is it useful for? • Evaluating capital structure (Where the money came from)
• Assessing risk and future cash flows
Balance Sheet - What are Assets? Economic resources that are owned or controlled by a
company that have future
economic benefit
Balance Sheet - To be reported on a o Be owned (or controlled) by the company
balance sheet, an asset must... (2 things) o Must possess expected future economic benefits
Balance Sheet - Examples of assets include: Cash, Accounts Receivables (A/R), Inventory, Land,
Buildings, Equipment, Copyrights, and Investments.
Balance Sheet - What is not an Asset? a strong management team, a well-designed supply chain, or
superior technology.
