FINANCIAL ACCOUNTING SIXTH 2026
PRACTICE TEST SHEET FULL SOLUTIONS
CORRECT ANSWERS GUARANTEED PASS
◉ Accounting Equation.
Answer: Assets = Liabilities + Owners' Equity. This equation is
fundamental and must always be true in double entry accounting.
◉ Accounting Period.
Answer: The period of time for which the financial results are
reported; typically either a month or a quarter or a year.
◉ Accounts Payable.
Answer: Liability account used to show the obligation to pay
suppliers who have provided goods or services on credit terms.
◉ Accounts Payable Turnover.
Answer: Accounts Payable Turnover is a ratio that is used to
measure how efficiently a business is paying its vendors. It is
calculated by dividing the credit purchases for the period by the
average accounts payable balance for the period. In the absence of
credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts
,payable turned over during the period. For most ratios in this
course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use
beginning or ending balances.
◉ Accounts Receivable.
Answer: Asset account used to show the claim to receive cash at
some future date for goods or services that have been supplied to a
customer on credit terms.
◉ Accounts Receivable Turnover.
Answer: Accounts Receivable Turnover is a ratio that is used to
measure how efficiently a business is collecting receivables from its
customers. It is calculated by dividing the credit sales for the period
by the average accounts receivable balance for the period. In the
absence of credit sales information, we may use total sales as a
substitute. The ratio represents how many times the accounts
receivable turned over during the period. For most ratios in this
course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use
beginning or ending balances.
◉ Accrual.
Answer: A revenue amount that is recorded after the revenue is
earned but before the payment is received or an expense amount
that is recorded after it has been incurred but before the payment
,has been made. In either case, for an accrual the exchange of cash is
expected at some future point after the initial revenue or expense is
recognized.
◉ Accrual Accounting Method.
Answer: This is the accounting method taught in this course,
followed by most companies, and required under US GAAP and IFRS.
The method follows the revenue recognition principle, which says
that revenue should be recognized in the period in which it is earned
and realizable, not necessarily when the cash is received and the
matching principle which says that expenses should be recognized
in the period in which the related revenue is recognized rather than
when the related cash is paid.
◉ Accrued Expenses.
Answer: Liability account used to record amounts at the end of an
accounting period to recognize expenses that were incurred in the
period but for which no invoice has yet been received nor payment
has yet been made. Examples are salaries/wages payable, accrued
rent expense, accrued legal fees. When the accrual is made, the debit
is to the appropriate expense account (payroll expense, rent
expense, legal expense) and the credit is to the accrued expense
account, which is a liability because it represents an obligation
which will need to be paid in the future. Remember accrued
expenses are NOT expenses.
◉ Accrued Liability.
, Answer: Liability accounts that record expenses that have been
recognized on the income statement but have not yet been paid.
Similar to accrued expenses.
◉ Accrued Payroll.
Answer: An accrued expense recorded at the end of a financial
period for amounts of payroll that have been worked but not yet
paid. It is a common type of accrued expense. See also
Salaries/Wages Payable.
◉ Accrued Revenue.
Answer: An asset account that records revenue that has been earned
and recognized on the income statement but not yet paid for by the
customer. At the time of the accrual, we debit the receivable account
and credit the appropriate accrued revenue account. When the cash
transfer ultimately occurs, we debit the cash account and credit the
receivable account.
◉ Accumulated Depreciation.
Answer: A contra asset account that includes the cumulative total of
all depreciation expenses recorded to date for specific assets. The
credit balance in this account offsets the debit balance in the asset
account which shows the original value of the asset. When the
original asset value is netted against the accumulated depreciation
for the asset you arrive at the net book value of the asset.
PRACTICE TEST SHEET FULL SOLUTIONS
CORRECT ANSWERS GUARANTEED PASS
◉ Accounting Equation.
Answer: Assets = Liabilities + Owners' Equity. This equation is
fundamental and must always be true in double entry accounting.
◉ Accounting Period.
Answer: The period of time for which the financial results are
reported; typically either a month or a quarter or a year.
◉ Accounts Payable.
Answer: Liability account used to show the obligation to pay
suppliers who have provided goods or services on credit terms.
◉ Accounts Payable Turnover.
Answer: Accounts Payable Turnover is a ratio that is used to
measure how efficiently a business is paying its vendors. It is
calculated by dividing the credit purchases for the period by the
average accounts payable balance for the period. In the absence of
credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts
,payable turned over during the period. For most ratios in this
course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use
beginning or ending balances.
◉ Accounts Receivable.
Answer: Asset account used to show the claim to receive cash at
some future date for goods or services that have been supplied to a
customer on credit terms.
◉ Accounts Receivable Turnover.
Answer: Accounts Receivable Turnover is a ratio that is used to
measure how efficiently a business is collecting receivables from its
customers. It is calculated by dividing the credit sales for the period
by the average accounts receivable balance for the period. In the
absence of credit sales information, we may use total sales as a
substitute. The ratio represents how many times the accounts
receivable turned over during the period. For most ratios in this
course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use
beginning or ending balances.
◉ Accrual.
Answer: A revenue amount that is recorded after the revenue is
earned but before the payment is received or an expense amount
that is recorded after it has been incurred but before the payment
,has been made. In either case, for an accrual the exchange of cash is
expected at some future point after the initial revenue or expense is
recognized.
◉ Accrual Accounting Method.
Answer: This is the accounting method taught in this course,
followed by most companies, and required under US GAAP and IFRS.
The method follows the revenue recognition principle, which says
that revenue should be recognized in the period in which it is earned
and realizable, not necessarily when the cash is received and the
matching principle which says that expenses should be recognized
in the period in which the related revenue is recognized rather than
when the related cash is paid.
◉ Accrued Expenses.
Answer: Liability account used to record amounts at the end of an
accounting period to recognize expenses that were incurred in the
period but for which no invoice has yet been received nor payment
has yet been made. Examples are salaries/wages payable, accrued
rent expense, accrued legal fees. When the accrual is made, the debit
is to the appropriate expense account (payroll expense, rent
expense, legal expense) and the credit is to the accrued expense
account, which is a liability because it represents an obligation
which will need to be paid in the future. Remember accrued
expenses are NOT expenses.
◉ Accrued Liability.
, Answer: Liability accounts that record expenses that have been
recognized on the income statement but have not yet been paid.
Similar to accrued expenses.
◉ Accrued Payroll.
Answer: An accrued expense recorded at the end of a financial
period for amounts of payroll that have been worked but not yet
paid. It is a common type of accrued expense. See also
Salaries/Wages Payable.
◉ Accrued Revenue.
Answer: An asset account that records revenue that has been earned
and recognized on the income statement but not yet paid for by the
customer. At the time of the accrual, we debit the receivable account
and credit the appropriate accrued revenue account. When the cash
transfer ultimately occurs, we debit the cash account and credit the
receivable account.
◉ Accumulated Depreciation.
Answer: A contra asset account that includes the cumulative total of
all depreciation expenses recorded to date for specific assets. The
credit balance in this account offsets the debit balance in the asset
account which shows the original value of the asset. When the
original asset value is netted against the accumulated depreciation
for the asset you arrive at the net book value of the asset.
