ACCT 370 Final Test Questions and
Quality Answers 2026-2027 Edition.
asset - Answer probable future economic benefits obtained/controlled by an entity as a result
of past transactions or events
liability - Answer probable future sacrifices of economic benefits arising from an entity's
present obligations (creditor's claim on assets)
equity - Answer Owner's claim on the assets of a business; equals the residual interest in an
entity's assets after deducting liabilities; also called net assets.
revenue - Answer amount earned from products/services
**recognized when an entity satisfies its contractual obligation to transfer control of
goods/services
expense - Answer expired costs/assets that are used to produce revenues
contra account - Answer an account that reduces a related account on a financial statement
(opposite normal balance)
-billings --> construction in progress; allowance for uncollectible accts --> gross A/R; treasury
stock --> shareholder's equity
preferred stock - Answer A special type of stock whose owners, though not generally having a
say in running the company, have a claim to profits before other stockholders do.
common stock - Answer the most basic form of ownership, including voting rights on major
issues, in a company
cumulative/noncumulative - Answer stock: cumulative- past and current dividends must be
paid to preferred stockholders first
noncumulative- company not required to pay dividends
participating/nonparticipating - Answer participating: entitles holders to share in profits above
declared dividend along w/ CS holders
nonparticipating: holders are entitled to receive only the stipulated dividends
, other comprehensive income - Answer arises from foreign currency gains/losses, gains/losses
on marketable debt securities that are available-for-sale,
single step vs multiple step income statement - Answer -single: services, net income + OCI
presented together, bottom line = comprehensive income
-multiple: goods, breaks into continuing and discontinuing operations, income statement
followed by OCI statement which lists indiv parts --> facilitates forecasting
balance sheet - Answer summarizes A,L,E as of a specific date; statement of financial position
income statement - Answer -shows company's profitability over given period of time
-unusual/infrequently occurring: disclosed separately as part of pre-tax income from continuing
operations
-discontinued operations: reported separately after income from continuing operations on an
after-tax basis
statement of cash flows - Answer explains causes for yr to yr changes in cash/cash equivalents
-operating: firm's profit-making activities
-investing: investments, and from liquidations of investments
-financing: issuance/repurchase of debt or equity securities, payment of dividends
retained earnings - Answer accumulation of all a company's earnings since inception
-prior RE + net income - dividends (reported in equity on balance sheet)
historical cost - Answer original liability (amt from transaction); current liabilities and PPE
fair value - Answer amt at which an asset could currently be bought or sold at; investments
present value - Answer long-term debt
net realizable value - Answer A/R --> gross A/R - est allowance for doubtful accounts
matching principle - Answer expenses matched w/ revenues recognized in a period
conservatism principle - Answer in uncertainty, accountants choose approach leading to
higher liabilities or lower assets
-risks and uncertainties are accounted for
Quality Answers 2026-2027 Edition.
asset - Answer probable future economic benefits obtained/controlled by an entity as a result
of past transactions or events
liability - Answer probable future sacrifices of economic benefits arising from an entity's
present obligations (creditor's claim on assets)
equity - Answer Owner's claim on the assets of a business; equals the residual interest in an
entity's assets after deducting liabilities; also called net assets.
revenue - Answer amount earned from products/services
**recognized when an entity satisfies its contractual obligation to transfer control of
goods/services
expense - Answer expired costs/assets that are used to produce revenues
contra account - Answer an account that reduces a related account on a financial statement
(opposite normal balance)
-billings --> construction in progress; allowance for uncollectible accts --> gross A/R; treasury
stock --> shareholder's equity
preferred stock - Answer A special type of stock whose owners, though not generally having a
say in running the company, have a claim to profits before other stockholders do.
common stock - Answer the most basic form of ownership, including voting rights on major
issues, in a company
cumulative/noncumulative - Answer stock: cumulative- past and current dividends must be
paid to preferred stockholders first
noncumulative- company not required to pay dividends
participating/nonparticipating - Answer participating: entitles holders to share in profits above
declared dividend along w/ CS holders
nonparticipating: holders are entitled to receive only the stipulated dividends
, other comprehensive income - Answer arises from foreign currency gains/losses, gains/losses
on marketable debt securities that are available-for-sale,
single step vs multiple step income statement - Answer -single: services, net income + OCI
presented together, bottom line = comprehensive income
-multiple: goods, breaks into continuing and discontinuing operations, income statement
followed by OCI statement which lists indiv parts --> facilitates forecasting
balance sheet - Answer summarizes A,L,E as of a specific date; statement of financial position
income statement - Answer -shows company's profitability over given period of time
-unusual/infrequently occurring: disclosed separately as part of pre-tax income from continuing
operations
-discontinued operations: reported separately after income from continuing operations on an
after-tax basis
statement of cash flows - Answer explains causes for yr to yr changes in cash/cash equivalents
-operating: firm's profit-making activities
-investing: investments, and from liquidations of investments
-financing: issuance/repurchase of debt or equity securities, payment of dividends
retained earnings - Answer accumulation of all a company's earnings since inception
-prior RE + net income - dividends (reported in equity on balance sheet)
historical cost - Answer original liability (amt from transaction); current liabilities and PPE
fair value - Answer amt at which an asset could currently be bought or sold at; investments
present value - Answer long-term debt
net realizable value - Answer A/R --> gross A/R - est allowance for doubtful accounts
matching principle - Answer expenses matched w/ revenues recognized in a period
conservatism principle - Answer in uncertainty, accountants choose approach leading to
higher liabilities or lower assets
-risks and uncertainties are accounted for
