WSP ACCOUNTING EVALUATION ANSWERS AND
QUESTIONS SET A+
✔✔Selling, General, & Administrative Expenses (SG&A) - ✔✔operating expenses that
aren't included in COGS are allocated to SG&A (may include terms such as 'marketing',
'operating expenses'). represents operating expenses not directly associated with
production/procurement of a product/service (e.g. marketing, executive salaries, legal
expenses, etc.)
✔✔R&D Expenses - ✔✔stem form company's activities that are directed at developing
new products/procedures. include compensation for employees, equipment, and
facilities engaged in the R&D process
✔✔Depreciation Expense - ✔✔for a purchase that is expected to help generate revenue
for several years, accrual accounting (matching principle specifically) dictates that we
spread the cost evenly over the life of the asset so that costs are matched to the period
when revenue is earned as a result of using the asset
✔✔ GAAP - ✔✔generally accepted accounting principles. accounting rules that govern
companies
✔✔FASB - ✔✔Financial Accounting Standards Board. in the U.S., the SEC authorizes
FASB to set U.S. accounting rules. FASB communicates these rules through issuance
of Statements of Financial Accounting Standards (SFAS); these statements make up
GAAP
✔✔IFRS - ✔✔International Financial Reporting Standards. over 100 non-U.S. countries
have adopted a unified set of international accounting standards
✔✔Basic Accounting Principles - ✔✔Assumption 1: a company is considered a
separate 'living' enterprise, apart from its owners. Assumption 2: a company is
considered a 'going concern' for foreseeable future (assumed to remain in existence
indefinitely). Assumption 3: financial statements must be reported in the national
, monetary unit (e.g. can't report employee/customer satisfaction, etc.). Assumption 4:
companies are required to file annual and interim reports
✔✔Major Underlying Accounting Principle 1 - ✔✔Historical Cost: financial statements
report companies' resources at an initial historical cost (as to avoid reevaluating assets
due to inflation, etc.)
✔✔Major Underlying Accounting Principle 2 - ✔✔Revenue Recognition: accrual basis of
accounting dictates that revenues must be recorded when earned and measurable.
According to this principle, companies can't record revenue until order is shipped to
customer
✔✔Major Underlying Accounting Principle 3 - ✔✔Matching Principle: costs associated
with making a product must be recorded during the same period as revenue generated
from that product
✔✔Major Underlying Accounting Principle 4 - ✔✔Full Disclosure: companies must
reveal all relevant economic information that they determine to make a different to its
users. This information must be reported in these sections of company's reports:
Financial Statements, Notes to Financial Statements, or Supplementary Information
✔✔Major Underlying Accounting Constraint 1 - ✔✔Estimates & Judgements: certain
measurements can't be performed completely accurately, and must therefore utilize
conservative estimates and judgements
✔✔Major Underlying Accounting Constraint 2 - ✔✔Materiality: inclusion and disclosure
of financial transactions in financial statements hinge on their size and effect on the
company performing them
✔✔Major Underlying Accounting Constraint 3 - ✔✔Consistency: for each company, the
preparation of financial statements must utilize measurement techniques and
assumptions which are consistent from one period to another (company must
consistently apply same inventory method across different fiscal years)
✔✔Major Underlying Accounting Constraint 4 - ✔✔Conservatism: financial statements
should be prepared with a downward measurement bias. Assets and revenues should
not be overstated, while liabilities and expenses should not be understated.
✔✔10-K Report - ✔✔At the end of the fiscal year, publicly-traded companies must file a
10-K report, which includes thorough overview of their businesses, finances, and
financial assets. Must be filed 60-90 days within year end, depending on status (large
accelerated, accelerated, non-accelerated). Audited by independent firms.
QUESTIONS SET A+
✔✔Selling, General, & Administrative Expenses (SG&A) - ✔✔operating expenses that
aren't included in COGS are allocated to SG&A (may include terms such as 'marketing',
'operating expenses'). represents operating expenses not directly associated with
production/procurement of a product/service (e.g. marketing, executive salaries, legal
expenses, etc.)
✔✔R&D Expenses - ✔✔stem form company's activities that are directed at developing
new products/procedures. include compensation for employees, equipment, and
facilities engaged in the R&D process
✔✔Depreciation Expense - ✔✔for a purchase that is expected to help generate revenue
for several years, accrual accounting (matching principle specifically) dictates that we
spread the cost evenly over the life of the asset so that costs are matched to the period
when revenue is earned as a result of using the asset
✔✔ GAAP - ✔✔generally accepted accounting principles. accounting rules that govern
companies
✔✔FASB - ✔✔Financial Accounting Standards Board. in the U.S., the SEC authorizes
FASB to set U.S. accounting rules. FASB communicates these rules through issuance
of Statements of Financial Accounting Standards (SFAS); these statements make up
GAAP
✔✔IFRS - ✔✔International Financial Reporting Standards. over 100 non-U.S. countries
have adopted a unified set of international accounting standards
✔✔Basic Accounting Principles - ✔✔Assumption 1: a company is considered a
separate 'living' enterprise, apart from its owners. Assumption 2: a company is
considered a 'going concern' for foreseeable future (assumed to remain in existence
indefinitely). Assumption 3: financial statements must be reported in the national
, monetary unit (e.g. can't report employee/customer satisfaction, etc.). Assumption 4:
companies are required to file annual and interim reports
✔✔Major Underlying Accounting Principle 1 - ✔✔Historical Cost: financial statements
report companies' resources at an initial historical cost (as to avoid reevaluating assets
due to inflation, etc.)
✔✔Major Underlying Accounting Principle 2 - ✔✔Revenue Recognition: accrual basis of
accounting dictates that revenues must be recorded when earned and measurable.
According to this principle, companies can't record revenue until order is shipped to
customer
✔✔Major Underlying Accounting Principle 3 - ✔✔Matching Principle: costs associated
with making a product must be recorded during the same period as revenue generated
from that product
✔✔Major Underlying Accounting Principle 4 - ✔✔Full Disclosure: companies must
reveal all relevant economic information that they determine to make a different to its
users. This information must be reported in these sections of company's reports:
Financial Statements, Notes to Financial Statements, or Supplementary Information
✔✔Major Underlying Accounting Constraint 1 - ✔✔Estimates & Judgements: certain
measurements can't be performed completely accurately, and must therefore utilize
conservative estimates and judgements
✔✔Major Underlying Accounting Constraint 2 - ✔✔Materiality: inclusion and disclosure
of financial transactions in financial statements hinge on their size and effect on the
company performing them
✔✔Major Underlying Accounting Constraint 3 - ✔✔Consistency: for each company, the
preparation of financial statements must utilize measurement techniques and
assumptions which are consistent from one period to another (company must
consistently apply same inventory method across different fiscal years)
✔✔Major Underlying Accounting Constraint 4 - ✔✔Conservatism: financial statements
should be prepared with a downward measurement bias. Assets and revenues should
not be overstated, while liabilities and expenses should not be understated.
✔✔10-K Report - ✔✔At the end of the fiscal year, publicly-traded companies must file a
10-K report, which includes thorough overview of their businesses, finances, and
financial assets. Must be filed 60-90 days within year end, depending on status (large
accelerated, accelerated, non-accelerated). Audited by independent firms.
