ACC 200 FINAL EXAM QUESTIONS AND
ANSWERS
3 Keys to a Successful Business - Answer-Idea, Capital, Management Skill
Types of Businesses - Answer-Manufacturing, Merchandising, Retail, Wholesale, Service
2 Ways to access Capital - Answer-Borrowing (Debt), Investing (Ownership, Equity)
4 General Purpose Financial Statements - Answer-Balance Sheet, Income Statement, Statement of Cash
Flows, Statement of retained Earnings (Optional)
GAAP - Answer-Generally Accepted Accounting Principles. Rules and standards for accounting that help
accounting statements be comparable.
SEC - Answer-Securities Exchange Commission. In charge of delegating who determines GAAP.
AICPA - Answer-American Institute of Certified Public Accountants. Originally in charge of setting GAAP.
Now in charge of setting and licensing CPAs.
,FASB - Answer-Financial Accounting Standards Board. In charge of determining GAAP today.
IRS - Answer-Internal Revenue Service. Collects income taxes from businesses.
CPA - Answer-Certified Personal Accountant. In charge of performing audits on publicly held companies
to insure credibility.
3 Legal Business Forms - Answer-Proprietorship (sole owner), Partnership (several owners), Corporation
(Many owners, board of directors, avoids liability)
Basic Accounting Equation - Answer-Assets = Liabilities + Owner's Equity, Owner's Equity = Capital Stock
+ Retained Earnings, Retained Earnings = Net Income - Dividends, Net Income = Revenue - Expenses.
EPS - Answer-Earnings Per Share, required on the income statement by GAAP.
Current - Answer-Assets or liabilities that will be paid or used up with in a year.
Objective Vs. Subjective - Answer-Objective (not opinion based), Subjective (Opinion based) GAAP
requires that asset valuation be Objective.
Historical Cost Principle - Answer-Assets are valued at their purchase cost (the FMV at the time). CPA's
usually undervalue Assets. The exception is if there is credible evidence that the asset's market value is
below its Historical Cost.
Entity Concept - Answer-CPAs will only value assets owned by the business, not the owners.
,Debit vs. Credit - Answer-Increases to Dividends, Expenses, and Assets will be shown in the debit
column. Increases to Liabilities, Revenues, or Capital Stock will be shown in the credit Column.
Decreases will be shown in the opposite column.
General Ledger - Answer-A file or book of accounts that has separate records for each kind of asset,
liability, or owner's equity.
Trial Balance - Answer-Used in a manual Accounting system, the totals of each of the accounts are put
in either the CR or DR columns for the entire period. The CR and DR columns should equal each other.
This form can help us create the financial statements.
Steps of the accounting System - Answer-1. Identify, 2. Analyze, 3. Record, 4. Summarize, 5. Trial
Balance (Only in a manual System), 6. Create Financial Statements, 7. Journalize and post to general
ledger, make closing entries and adjusting entries
Revenue Recognition Principle - Answer-Revenues are to be recognized in the period in which they are
earned and not necessarily when the cash is received.
Matching Principle - Answer-Expenses are to be recognized in the period in which they provide benefit
to the business, not when the cash is paid.
Prepaid Expenses - Answer-Asset, should be adjusted at the end of the period for the amount used.
Unearned Revenue - Answer-Liability, should be adjusted at the end of the period for the amount used
up in the period.
Closing Entries - Answer-Revenues, Expenses, and Dividends close to Retained Earnings.
Perpetual Inventory Account - Answer-Accounting for inventory at the time of an inflow or outflow of
inventory so that it will show the amount of inventory at any given time.
, Computerized inventory systems are great for - Answer-Managing seasonal inventories like (valentines
day cards), helps us understand trends, finding relationships of purchasing between different products.
Accounting for Returns of Inventory to the supplier - Answer-If we return something to the supplier, we
credit inventory and debit accounts payable. If there is a return before we pay off the inventory we
bought from the supplier on a discount. We may put 1900 in accounts payable but get a 2% discount
and pay them 1862. In this case we would also discount inventory by 38 because the inventory was
actually less expensive than we thought.
Specific Identification - Answer-The cost of goods sold and inventory at the sale of a good has to be
specific to the price we paid for that item of inventory.
Equal Inventory Bought at different Prices - Answer-If we buy jelly beans that are identical but at two
different prices on two different days, what is the cost of goods sold. If it is all sold it would not matter
which method you account for cost of goods sold.
LIFO - Answer-Last inventory in, first inventory out for accounting for cost of goods sold.
FIFO - Answer-First in, first out for accounting for cost of goods sold.
MWA - Answer-(Moving Weighted Average) Average cost of all of the inventory for accounting for cost
of goods sold. Can be solved as TOTAL COST/Total units. If more is purchased the old amount is
multiplied by the original average and a new average is created.
GAAP requirements for COGS - Answer-GAAP allows LIFO, FIFO or MWA, but which ever method is
chosen must be used consistently. They can put the other method in the footnotes for investors if they
want to.
ANSWERS
3 Keys to a Successful Business - Answer-Idea, Capital, Management Skill
Types of Businesses - Answer-Manufacturing, Merchandising, Retail, Wholesale, Service
2 Ways to access Capital - Answer-Borrowing (Debt), Investing (Ownership, Equity)
4 General Purpose Financial Statements - Answer-Balance Sheet, Income Statement, Statement of Cash
Flows, Statement of retained Earnings (Optional)
GAAP - Answer-Generally Accepted Accounting Principles. Rules and standards for accounting that help
accounting statements be comparable.
SEC - Answer-Securities Exchange Commission. In charge of delegating who determines GAAP.
AICPA - Answer-American Institute of Certified Public Accountants. Originally in charge of setting GAAP.
Now in charge of setting and licensing CPAs.
,FASB - Answer-Financial Accounting Standards Board. In charge of determining GAAP today.
IRS - Answer-Internal Revenue Service. Collects income taxes from businesses.
CPA - Answer-Certified Personal Accountant. In charge of performing audits on publicly held companies
to insure credibility.
3 Legal Business Forms - Answer-Proprietorship (sole owner), Partnership (several owners), Corporation
(Many owners, board of directors, avoids liability)
Basic Accounting Equation - Answer-Assets = Liabilities + Owner's Equity, Owner's Equity = Capital Stock
+ Retained Earnings, Retained Earnings = Net Income - Dividends, Net Income = Revenue - Expenses.
EPS - Answer-Earnings Per Share, required on the income statement by GAAP.
Current - Answer-Assets or liabilities that will be paid or used up with in a year.
Objective Vs. Subjective - Answer-Objective (not opinion based), Subjective (Opinion based) GAAP
requires that asset valuation be Objective.
Historical Cost Principle - Answer-Assets are valued at their purchase cost (the FMV at the time). CPA's
usually undervalue Assets. The exception is if there is credible evidence that the asset's market value is
below its Historical Cost.
Entity Concept - Answer-CPAs will only value assets owned by the business, not the owners.
,Debit vs. Credit - Answer-Increases to Dividends, Expenses, and Assets will be shown in the debit
column. Increases to Liabilities, Revenues, or Capital Stock will be shown in the credit Column.
Decreases will be shown in the opposite column.
General Ledger - Answer-A file or book of accounts that has separate records for each kind of asset,
liability, or owner's equity.
Trial Balance - Answer-Used in a manual Accounting system, the totals of each of the accounts are put
in either the CR or DR columns for the entire period. The CR and DR columns should equal each other.
This form can help us create the financial statements.
Steps of the accounting System - Answer-1. Identify, 2. Analyze, 3. Record, 4. Summarize, 5. Trial
Balance (Only in a manual System), 6. Create Financial Statements, 7. Journalize and post to general
ledger, make closing entries and adjusting entries
Revenue Recognition Principle - Answer-Revenues are to be recognized in the period in which they are
earned and not necessarily when the cash is received.
Matching Principle - Answer-Expenses are to be recognized in the period in which they provide benefit
to the business, not when the cash is paid.
Prepaid Expenses - Answer-Asset, should be adjusted at the end of the period for the amount used.
Unearned Revenue - Answer-Liability, should be adjusted at the end of the period for the amount used
up in the period.
Closing Entries - Answer-Revenues, Expenses, and Dividends close to Retained Earnings.
Perpetual Inventory Account - Answer-Accounting for inventory at the time of an inflow or outflow of
inventory so that it will show the amount of inventory at any given time.
, Computerized inventory systems are great for - Answer-Managing seasonal inventories like (valentines
day cards), helps us understand trends, finding relationships of purchasing between different products.
Accounting for Returns of Inventory to the supplier - Answer-If we return something to the supplier, we
credit inventory and debit accounts payable. If there is a return before we pay off the inventory we
bought from the supplier on a discount. We may put 1900 in accounts payable but get a 2% discount
and pay them 1862. In this case we would also discount inventory by 38 because the inventory was
actually less expensive than we thought.
Specific Identification - Answer-The cost of goods sold and inventory at the sale of a good has to be
specific to the price we paid for that item of inventory.
Equal Inventory Bought at different Prices - Answer-If we buy jelly beans that are identical but at two
different prices on two different days, what is the cost of goods sold. If it is all sold it would not matter
which method you account for cost of goods sold.
LIFO - Answer-Last inventory in, first inventory out for accounting for cost of goods sold.
FIFO - Answer-First in, first out for accounting for cost of goods sold.
MWA - Answer-(Moving Weighted Average) Average cost of all of the inventory for accounting for cost
of goods sold. Can be solved as TOTAL COST/Total units. If more is purchased the old amount is
multiplied by the original average and a new average is created.
GAAP requirements for COGS - Answer-GAAP allows LIFO, FIFO or MWA, but which ever method is
chosen must be used consistently. They can put the other method in the footnotes for investors if they
want to.
