Financial & Managerial Accounting EXAM 1 ACTUAL UPDATED QUESTIONS AND
CORRECT ANSWERS
Accounting an information and measurement system that identifies, records and
communicates relevant, reliable and comparable information about an
organizations activities
, Recordkeeping/Bookkeeping the recording of transactions and events, either manually or electronically
External Users not directly involved in running the organization, need to all coincide with
one method
Internal Information Users those directly involved in managing and operating an organization, not so
concerned with others
Ethics beliefs that distinguish right from wrong
Measurement Principle (cost principle) accounting information is based on actual cost
Revenue (sales) Recognition provides guidance on when a company must recognize revenue
Expense Recognition Principle (matching principle) record the expenses it incurred to generate the revenue reported
Full Disclosure prescribes that a company report the details behind financial statements
that would impact users' decisions.
Accounting Equation (simple) Assets = Liabilities + Equity
Assets resources a company owns or controls
Liabilities creditors' claims on assets (reflect company obligations to provide assets,
products or services to others)
Equity (net assets/residual equity) the owner's claim on assets, has two parts: -contributed capital
-retained earnings
Contributed Capital amount that stockholders invest in the company included under common
stock
Retained Earnings refer to income (revenues less expenses) that has not been distributed to its
stockholders
net income - cash dividends = retained earnings
Dividends distribution of assets to stockholders
Revenues Increase retained earnings and are resources generated from a company's
earnings activities
Expenses decrease retained earnings and are the cost of assets or services used to
earn revenues
Accounting Equation (full and complicated) Assets = liabilities + Equity [contributed capital + retained earnings]
Assets = liabilities + common stock + retained earnings [- dividends +
revenue - expenses]
CORRECT ANSWERS
Accounting an information and measurement system that identifies, records and
communicates relevant, reliable and comparable information about an
organizations activities
, Recordkeeping/Bookkeeping the recording of transactions and events, either manually or electronically
External Users not directly involved in running the organization, need to all coincide with
one method
Internal Information Users those directly involved in managing and operating an organization, not so
concerned with others
Ethics beliefs that distinguish right from wrong
Measurement Principle (cost principle) accounting information is based on actual cost
Revenue (sales) Recognition provides guidance on when a company must recognize revenue
Expense Recognition Principle (matching principle) record the expenses it incurred to generate the revenue reported
Full Disclosure prescribes that a company report the details behind financial statements
that would impact users' decisions.
Accounting Equation (simple) Assets = Liabilities + Equity
Assets resources a company owns or controls
Liabilities creditors' claims on assets (reflect company obligations to provide assets,
products or services to others)
Equity (net assets/residual equity) the owner's claim on assets, has two parts: -contributed capital
-retained earnings
Contributed Capital amount that stockholders invest in the company included under common
stock
Retained Earnings refer to income (revenues less expenses) that has not been distributed to its
stockholders
net income - cash dividends = retained earnings
Dividends distribution of assets to stockholders
Revenues Increase retained earnings and are resources generated from a company's
earnings activities
Expenses decrease retained earnings and are the cost of assets or services used to
earn revenues
Accounting Equation (full and complicated) Assets = liabilities + Equity [contributed capital + retained earnings]
Assets = liabilities + common stock + retained earnings [- dividends +
revenue - expenses]
