MBA PrepWorks Ivy Software - Financial
Accounting
GAAP - ✔✔ correct answer Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
Economic Entity - ✔✔ correct answer Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
Going Concern - ✔✔ correct answer The accounting assumption that a business is expected to operate
indefinitely. Assumes the company will continue so asset values are at a historical cost.
Monetary Unit - ✔✔ correct answer Financial transactions are denominated in a stable unit of measure.
Everything is in US dollars
Accounting Periods - ✔✔ correct answer The results of operations for an entity must be reported on a
periodic basis, usually a year
Revenue/Expense Matching - ✔✔ correct answer All expenses incurred to generate revenues should be
recognized during the same period as those revenues
Conservatism - ✔✔ correct answer Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
Understandability - ✔✔ correct answer Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
Relevance - ✔✔ correct answer The quality of information that indicates the information makes a
difference in a decision.
Comparability - ✔✔ correct answer Ability to compare the accounting information of different
companies because they use the same accounting principles. Quantitative assessment
, MBA PrepWorks Ivy Software - Financial
Accounting
Consistency - ✔✔ correct answer Use of the same accounting principles and methods from year to year
within a company. Allows information to be compared over time.
Materiality - ✔✔ correct answer An item should not be reported if it is not large enough to influence the
users of a financial statement.
Who is the rule making body for GAAP? - ✔✔ correct answer Financial Accounting Standards Board
(FASB)
True or False: The 10K is required by the FASB - ✔✔ correct answer False
__________ _________ can be used for comparing budgeted and forecasted costs with actual
performance. - ✔✔ correct answer Managerial Accounting
Is the annual report a good example of tax accounting? - ✔✔ correct answer No
What is generally violated in periods of rising prices? - ✔✔ correct answer Monetary Concept
What formula is the basis for double entry bookkeeping? - ✔✔ correct answer Assets = Liabilities +
Owners' Equity
____ is a snapshot of a business. - ✔✔ correct answer Balance Sheet
_____ reports the results over a period of time. - ✔✔ correct answer Income statement
True or False: Owners quity is also called stockholders equity. - ✔✔ correct answer True
What does the Statement of Retained Earnings show? - ✔✔ correct answer It shows the retained
earning at the beginning of the period, plus net income, less dividends
Accounting
GAAP - ✔✔ correct answer Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
Economic Entity - ✔✔ correct answer Company keeps its activity separate from its owners and other
businesses. One firm, one set of books.
Going Concern - ✔✔ correct answer The accounting assumption that a business is expected to operate
indefinitely. Assumes the company will continue so asset values are at a historical cost.
Monetary Unit - ✔✔ correct answer Financial transactions are denominated in a stable unit of measure.
Everything is in US dollars
Accounting Periods - ✔✔ correct answer The results of operations for an entity must be reported on a
periodic basis, usually a year
Revenue/Expense Matching - ✔✔ correct answer All expenses incurred to generate revenues should be
recognized during the same period as those revenues
Conservatism - ✔✔ correct answer Accounting theory advocates that it is better for potential
measurement errors to understate rather than overstate profits
Understandability - ✔✔ correct answer Information presented in a clear and concise fashion so that
users can interpret it and comprehend its meaning.
Relevance - ✔✔ correct answer The quality of information that indicates the information makes a
difference in a decision.
Comparability - ✔✔ correct answer Ability to compare the accounting information of different
companies because they use the same accounting principles. Quantitative assessment
, MBA PrepWorks Ivy Software - Financial
Accounting
Consistency - ✔✔ correct answer Use of the same accounting principles and methods from year to year
within a company. Allows information to be compared over time.
Materiality - ✔✔ correct answer An item should not be reported if it is not large enough to influence the
users of a financial statement.
Who is the rule making body for GAAP? - ✔✔ correct answer Financial Accounting Standards Board
(FASB)
True or False: The 10K is required by the FASB - ✔✔ correct answer False
__________ _________ can be used for comparing budgeted and forecasted costs with actual
performance. - ✔✔ correct answer Managerial Accounting
Is the annual report a good example of tax accounting? - ✔✔ correct answer No
What is generally violated in periods of rising prices? - ✔✔ correct answer Monetary Concept
What formula is the basis for double entry bookkeeping? - ✔✔ correct answer Assets = Liabilities +
Owners' Equity
____ is a snapshot of a business. - ✔✔ correct answer Balance Sheet
_____ reports the results over a period of time. - ✔✔ correct answer Income statement
True or False: Owners quity is also called stockholders equity. - ✔✔ correct answer True
What does the Statement of Retained Earnings show? - ✔✔ correct answer It shows the retained
earning at the beginning of the period, plus net income, less dividends
