FAC1502 FINAL PAPER UPDATED
COMPLETE QUESTIONS AND CORRECT
ANSWERS BUNDLED REVIEW GUIDE
●● Separate Entity Assumption
Answer: Business transactions are separate from owner's personal
transactions
●● Going Concern Assumption
Answer: The business will continue operating indefinitely
●● Monetary Unit Assumption
Answer: Only monetary transactions are recorded; assumes stable
currency
●● Time Period Assumption
Answer: Business activities can be divided into time periods for
reporting
●● GAAP
Answer: Generally Accepted Accounting Principles; common
accounting rules used in the US
,●● FASB
Answer: Financial Accounting Standards Board; establishes US
accounting standards
●● Materiality Concept
Answer: Information is material if its omission could influence
economic decisions
●● Basic Accounting Equation
Answer: Assets = Liabilities + Stockholders' Equity
●● Assets
Answer: Resources owned by the company with future economic value
●● Current Assets
Answer: Assets converted to cash within one year or operating cycle
(examples: Cash, Accounts Receivable, Inventory)
●● Cash
Answer: Currency, coins, and checking accounts
●● Cash Equivalents
Answer: Highly liquid investments maturing within 3 months
, ●● Tangible Assets
Answer: Physical assets like equipment, buildings, and land
●● Liabilities
Answer: Obligations the company owes to others
●● Current Liabilities
Answer: Obligations due within one year (examples: Accounts Payable,
Accrued Liabilities, Unearned Revenue)
●● Long-Term Liabilities
Answer: Obligations due beyond one year (examples: bonds, mortgages)
●● Accrued Liabilities
Answer: Expenses incurred but not yet paid
●● Contingent Liability
Answer: A potential liability that depends on a future event
●● Stockholders' Equity
Answer: Owner's residual interest in the company
COMPLETE QUESTIONS AND CORRECT
ANSWERS BUNDLED REVIEW GUIDE
●● Separate Entity Assumption
Answer: Business transactions are separate from owner's personal
transactions
●● Going Concern Assumption
Answer: The business will continue operating indefinitely
●● Monetary Unit Assumption
Answer: Only monetary transactions are recorded; assumes stable
currency
●● Time Period Assumption
Answer: Business activities can be divided into time periods for
reporting
●● GAAP
Answer: Generally Accepted Accounting Principles; common
accounting rules used in the US
,●● FASB
Answer: Financial Accounting Standards Board; establishes US
accounting standards
●● Materiality Concept
Answer: Information is material if its omission could influence
economic decisions
●● Basic Accounting Equation
Answer: Assets = Liabilities + Stockholders' Equity
●● Assets
Answer: Resources owned by the company with future economic value
●● Current Assets
Answer: Assets converted to cash within one year or operating cycle
(examples: Cash, Accounts Receivable, Inventory)
●● Cash
Answer: Currency, coins, and checking accounts
●● Cash Equivalents
Answer: Highly liquid investments maturing within 3 months
, ●● Tangible Assets
Answer: Physical assets like equipment, buildings, and land
●● Liabilities
Answer: Obligations the company owes to others
●● Current Liabilities
Answer: Obligations due within one year (examples: Accounts Payable,
Accrued Liabilities, Unearned Revenue)
●● Long-Term Liabilities
Answer: Obligations due beyond one year (examples: bonds, mortgages)
●● Accrued Liabilities
Answer: Expenses incurred but not yet paid
●● Contingent Liability
Answer: A potential liability that depends on a future event
●● Stockholders' Equity
Answer: Owner's residual interest in the company
