©Themoon EXAM SOLUTIONS
27/11/2024 11:35AM
BFOR 400-Exam 2 Questions and Answers
Accounting - Answers✓✓the tracking of business activities in a particular time period
Reasons for accounting - Answers✓✓1) Internally- facilitates decision making, tracking of
company performance
2) Externally- individuals with some type of relationship with the organization may need to
know the financial information like: investors, creditors, potential vendors, etc
Accounting System - Answers✓✓comprises the methods by which companies record
transactions and financial activities; includes tracking of business activities (through the initial
entry into the company's records), classification of info, and presenting the info to the end user
Accrual basis - Answers✓✓revenue is recognized when it is earned, and the expenses are
recorded when they are incurred; includes 2 major areas: 1) accounts receivable & 2) accounts
payable
Cash bias - Answers✓✓the receipt of funds into an entity & the payment for goods and
services; revenue is recorded when it is received & expenses are recorded when why are paid;
cash basis is not widely used for financial statement reporting purposes
3 Levels of reporting financial statements - Answers✓✓1) compilations
2) reviews
3) audits
, ©Themoon EXAM SOLUTIONS
27/11/2024 11:35AM
Compilations - Answers✓✓outside accountants simply format and report management's results
and balances consistent with Generally Acceptable Accounting Principles (GAAP); simply
financial reporting, and provide the lowest level of assurance at the lowest cost
Reviews - Answers✓✓review of the financial statements, accounts provide the same reporting
as for compilations, but also perform inquiry and analytical review procedures over the info; no
opinion is expressed on the financial statements
Audits - Answers✓✓audited financial statements are reported in accordance with GAAP, but
detailed audit procedures are performed on the financial results and balances, and also on the
internal controls of the organization being audited;
provide the highest level of assurance at the greatest cost
5 Accounting Cycles - Answers✓✓1) Sales and accounts receivable
2) Purchases and accounts payable
3) Human resources and payroll
4) Inventory and storage/warehousing
5) Capital expenditures
Sales and accounts receivable - Answers✓✓-Fundamental concept of any business involved
getting business (sales) from customers, billing for those goods or services, and then making
sure the accounts receivable are collected
-Revenue from sales appears on IS
-Accounts receivable appears on BS
, ©Themoon EXAM SOLUTIONS
27/11/2024 11:35AM
-Cash sales and collections on accounts receivables directly affect the cash balance, which is a
balance sheet item
Sales and Accounts Receivables - Internal controls to minimize asset misappropriation or theft -
Answers✓✓-Audit trail
-Approval process: credit approval, write-off approval, approval for shipment of products, etc.
-Independent checks on the system: at a minimum, include independent preparation of bank and
other account reconciliations, supervision
Purchases and accounts payable - Answers✓✓-This cycle affects the BS
-Cash, inventory, and prepaid expenses; equipment, land, building, and accumulated
depreciation; accounts payable and accrued expenses, etc
-Also affect IS
-Cost of goods and the sale of goods (results in the company's gross profit)
-Expenses such as administration, travel, advertising, taxes, etc
Human resources and payroll - Answers✓✓-this aspect of the cycle includes recruitment,
retention, and remuneration of employees, and the related underlying data of time records,
expense reports, and other matters
-Cash and payroll taxes payable on the BS
-Salaries/payroll, payroll taxes, benefits, travel, and entertainment, and other related expenses
on the IS
27/11/2024 11:35AM
BFOR 400-Exam 2 Questions and Answers
Accounting - Answers✓✓the tracking of business activities in a particular time period
Reasons for accounting - Answers✓✓1) Internally- facilitates decision making, tracking of
company performance
2) Externally- individuals with some type of relationship with the organization may need to
know the financial information like: investors, creditors, potential vendors, etc
Accounting System - Answers✓✓comprises the methods by which companies record
transactions and financial activities; includes tracking of business activities (through the initial
entry into the company's records), classification of info, and presenting the info to the end user
Accrual basis - Answers✓✓revenue is recognized when it is earned, and the expenses are
recorded when they are incurred; includes 2 major areas: 1) accounts receivable & 2) accounts
payable
Cash bias - Answers✓✓the receipt of funds into an entity & the payment for goods and
services; revenue is recorded when it is received & expenses are recorded when why are paid;
cash basis is not widely used for financial statement reporting purposes
3 Levels of reporting financial statements - Answers✓✓1) compilations
2) reviews
3) audits
, ©Themoon EXAM SOLUTIONS
27/11/2024 11:35AM
Compilations - Answers✓✓outside accountants simply format and report management's results
and balances consistent with Generally Acceptable Accounting Principles (GAAP); simply
financial reporting, and provide the lowest level of assurance at the lowest cost
Reviews - Answers✓✓review of the financial statements, accounts provide the same reporting
as for compilations, but also perform inquiry and analytical review procedures over the info; no
opinion is expressed on the financial statements
Audits - Answers✓✓audited financial statements are reported in accordance with GAAP, but
detailed audit procedures are performed on the financial results and balances, and also on the
internal controls of the organization being audited;
provide the highest level of assurance at the greatest cost
5 Accounting Cycles - Answers✓✓1) Sales and accounts receivable
2) Purchases and accounts payable
3) Human resources and payroll
4) Inventory and storage/warehousing
5) Capital expenditures
Sales and accounts receivable - Answers✓✓-Fundamental concept of any business involved
getting business (sales) from customers, billing for those goods or services, and then making
sure the accounts receivable are collected
-Revenue from sales appears on IS
-Accounts receivable appears on BS
, ©Themoon EXAM SOLUTIONS
27/11/2024 11:35AM
-Cash sales and collections on accounts receivables directly affect the cash balance, which is a
balance sheet item
Sales and Accounts Receivables - Internal controls to minimize asset misappropriation or theft -
Answers✓✓-Audit trail
-Approval process: credit approval, write-off approval, approval for shipment of products, etc.
-Independent checks on the system: at a minimum, include independent preparation of bank and
other account reconciliations, supervision
Purchases and accounts payable - Answers✓✓-This cycle affects the BS
-Cash, inventory, and prepaid expenses; equipment, land, building, and accumulated
depreciation; accounts payable and accrued expenses, etc
-Also affect IS
-Cost of goods and the sale of goods (results in the company's gross profit)
-Expenses such as administration, travel, advertising, taxes, etc
Human resources and payroll - Answers✓✓-this aspect of the cycle includes recruitment,
retention, and remuneration of employees, and the related underlying data of time records,
expense reports, and other matters
-Cash and payroll taxes payable on the BS
-Salaries/payroll, payroll taxes, benefits, travel, and entertainment, and other related expenses
on the IS
