MBA 510 STANDARD EXAMS ANSWERS AND
QUESTIONS SET A+
✔✔What is the order in how financial statements are prepared? - ✔✔Income Statement
Retained Earnings
Balance Sheet
Statement of cash flows
✔✔What two financial statements are interrelated? - ✔✔Balance sheet and statement
of cash flows
✔✔These govern the amount and/or timing of information to be reported in financial
statements - ✔✔Principles
✔✔This principle suggests that cost is measured on a cash or equal-to-cash basis and
governs valuation of assets and liabilities on the balance sheet - ✔✔Measurement
principle
✔✔This principle suggests that revenue is recognized when earned and governs the
timing of revenues recognized on the income statement - ✔✔Revenue recognition
principle
✔✔This principle suggest that expenses are recognized in the same period as revenues
and governs the timing of expenses prepared on the income statement - ✔✔Expense
recognition principle
✔✔This principle suggests that a company must report the details behind the financial
statements that would impact users decisions - ✔✔Full disclosure principle
✔✔These are generally related to the financial statement headings - ✔✔Assumptions
✔✔This assumption is a presumption that a business will continue operating instead of
closing or selling - ✔✔Going concern assumption
, ✔✔This assumption we can express transactions and events in monetary units -
✔✔Monetary unit assumption
✔✔This assumption presumes that life of company can be divided into time periods and
that useful reports can be prepared for those periods - ✔✔Time period assumption
✔✔This assumption states that a business is accounted separately from other business
entities, including owners - ✔✔Business entity assumption
✔✔This is reasonableness of information to be reported - ✔✔Accounting constraints
✔✔This constraint is info that would influence the decision of a reasonable person
needs to be disclosed and is a function of the nature of the item and/or dollar amount -
✔✔Materiality
✔✔This constraint benefits that info disclosed must be greater than costs of providing
info - ✔✔Benefits exceed costs
✔✔What are the steps of analyzing and reporting accounts? - ✔✔1. Analyze each
transaction and event using the equation
2. Record in the journal
3. Post journal to the ledger accounts
4. Prepare and analyze the trial balance and financial statements
✔✔This is an event involving transferring between 2 entities like acquiring assets from
owners, borrowing money from creditors, and purchasing or selling goods and services
- ✔✔Accounting transaction
✔✔These identify and describe transactions and events that are entering the system -
✔✔Source documents
✔✔Sales tickets, checks, purchase orders, bills from supplies, employee earnings,
invoices, and bank statements are examples of what? - ✔✔Source documents
✔✔The process to get from transactions and events to financial statements involves: -
✔✔Identifying, Analyzing, Recording, and Posting transactions
✔✔Prepaid insurance and company revenue accounts are what type of accounts? -
✔✔General ledger accounts
✔✔This is a record of all accounts used by the company - ✔✔General ledger accounts
QUESTIONS SET A+
✔✔What is the order in how financial statements are prepared? - ✔✔Income Statement
Retained Earnings
Balance Sheet
Statement of cash flows
✔✔What two financial statements are interrelated? - ✔✔Balance sheet and statement
of cash flows
✔✔These govern the amount and/or timing of information to be reported in financial
statements - ✔✔Principles
✔✔This principle suggests that cost is measured on a cash or equal-to-cash basis and
governs valuation of assets and liabilities on the balance sheet - ✔✔Measurement
principle
✔✔This principle suggests that revenue is recognized when earned and governs the
timing of revenues recognized on the income statement - ✔✔Revenue recognition
principle
✔✔This principle suggest that expenses are recognized in the same period as revenues
and governs the timing of expenses prepared on the income statement - ✔✔Expense
recognition principle
✔✔This principle suggests that a company must report the details behind the financial
statements that would impact users decisions - ✔✔Full disclosure principle
✔✔These are generally related to the financial statement headings - ✔✔Assumptions
✔✔This assumption is a presumption that a business will continue operating instead of
closing or selling - ✔✔Going concern assumption
, ✔✔This assumption we can express transactions and events in monetary units -
✔✔Monetary unit assumption
✔✔This assumption presumes that life of company can be divided into time periods and
that useful reports can be prepared for those periods - ✔✔Time period assumption
✔✔This assumption states that a business is accounted separately from other business
entities, including owners - ✔✔Business entity assumption
✔✔This is reasonableness of information to be reported - ✔✔Accounting constraints
✔✔This constraint is info that would influence the decision of a reasonable person
needs to be disclosed and is a function of the nature of the item and/or dollar amount -
✔✔Materiality
✔✔This constraint benefits that info disclosed must be greater than costs of providing
info - ✔✔Benefits exceed costs
✔✔What are the steps of analyzing and reporting accounts? - ✔✔1. Analyze each
transaction and event using the equation
2. Record in the journal
3. Post journal to the ledger accounts
4. Prepare and analyze the trial balance and financial statements
✔✔This is an event involving transferring between 2 entities like acquiring assets from
owners, borrowing money from creditors, and purchasing or selling goods and services
- ✔✔Accounting transaction
✔✔These identify and describe transactions and events that are entering the system -
✔✔Source documents
✔✔Sales tickets, checks, purchase orders, bills from supplies, employee earnings,
invoices, and bank statements are examples of what? - ✔✔Source documents
✔✔The process to get from transactions and events to financial statements involves: -
✔✔Identifying, Analyzing, Recording, and Posting transactions
✔✔Prepaid insurance and company revenue accounts are what type of accounts? -
✔✔General ledger accounts
✔✔This is a record of all accounts used by the company - ✔✔General ledger accounts
