Accounting Principles and Formulas Questions With Verified Answers | UPDATED

Accounting Principles and Formulas Questions With Verified Answers | UPDATED Basic Accounting Equation - ANSWER Assets = Liabilities + Owner's Equity Business Entity - ANSWER The financial statements report about a single business. Every business gets its own set of books. Accountants do not mix in the owner's personal financial information. Current - ANSWER "Current" liabilities are those debts that must be paid within one year or one operating cycle, whichever is longer. Current Ratio - ANSWER Current Assets/Current Liabilities = Current Ratio Debt Ratio - ANSWER Total Liabilities/Total Assets = Debt Ratio Alternate Debt Ratio - ANSWER 100% - Equity Ratio = Debt Ratio Double Entry Accounting - ANSWER Recording business transactions twice: once to show where the money came from, and another time to show where the money went. Equity Ratio - ANSWER Total Equity/Total Assets = Equity Ratio Alternate Equity Ratio - ANSWER 100% - Debt Ratio = Equity Ratio Liability Account - ANSWER Payable or Deferred Equity Account - ANSWER Owner's name, Withdrawal, Dividend, Stock. Income Account - ANSWER Sales, Income, or Revenue Expense Account - ANSWER Expense (every expense account should be marked with "exp." at the end) Asset Account - ANSWER Receivable, Prepaid, Investment, Inventory (many asset accounts merely have the name of the asset without any special identifying word) Book value of a long-lived asset - ANSWER Purchase Price - Accumulated Depreciation = Book Value Ending owner's equity formula - ANSWER Equity (beginning) + Net Income - Withdrawal = Equity (ending) Gross Profit (GP) - ANSWER Sales - CGS = GP Income Statement Formula - ANSWER Sales - CGS = GP GP - Expenses = Net Income Cash flow statement formula - ANSWER Cash from operations + Cash from investment activities + Cash from financing activities = Total change in cash + Cash - beginning of period = Cash - end of period. Conservative Principle - ANSWER The accounting principle that requires accountants to resolve financial statement uncertainty in the least favorable way. Going-Concern Principle - ANSWER The accounting principle that requires that financial statements be based on the assumption that the business will last indefinitely. Historical Cost Principle - ANSWER The accounting principle that requires assets to be reported on balance sheets at their historical cost. Objectivity Principle - ANSWER The accounting principles that requires business transactions to be recorded using the best objective evidence.