AU 60 Exam - Chapter 5 UPDATED
Questions and CORRECT Answers
accounting - CORRECT ANSWER - classification, analysis and determination of the
appropriate method of reporting the effects of the bookkeeping records in an organization's
financial statements
balance sheet - CORRECT ANSWER - a listing of everything that the organization owns
and everything that it owes at a particular moment in time
accounting equation - CORRECT ANSWER - assets-liabilities= shareholders equity
current assets - CORRECT ANSWER - assets that are expected to be converted into cash,
sold or exchanged within the business's normal operating cycle, usually on eyear
goodwill - CORRECT ANSWER - whenever an acquiring organization pays more than
book value for the acquired organization, the difference between the price paid for the
organization and the book value can be listed as ______ on the balance sheet
receivables - CORRECT ANSWER - amounts owed to a company by customers and other
outsiders
marketable securities - CORRECT ANSWER - temporary investments that can be easily
converted into cash
inventory - CORRECT ANSWER - consists of good available for sale to customers; for a
manufacturing company, also includes raw materials and finished goods
prepaid expenses - CORRECT ANSWER - an asset classification that represents the
amount that has already been paid for services that have not been used or received
, physical depreciation - CORRECT ANSWER - depreciable assets wear and tear over a
period of time
functional depreciation - CORRECT ANSWER - caused by obsolescence or inadequate
performance of the asset
accounting depreciation - CORRECT ANSWER - used to spread the cost of an asset over
its useful economic life
current liabilities - CORRECT ANSWER - payments are reasonably expected to require
cash or creation of other current liabilities in one year; include accounts payable, notes payable,
the estimated amount for income taxes and accruals
accruals - CORRECT ANSWER - obligations that are owed because of the passage of time
but that will be paid in the future
sharehodlers equity - CORRECT ANSWER - net amount of assets after deducting an
organization's debts and obligations (liabilities)
retained earnings - CORRECT ANSWER - the cumulative net income that an organization
has retained, after payment of dividends, for reinvestment in the organizations operations
income statement - CORRECT ANSWER - shows an organization's profit or loss for a
stated period
revenue - CORRECT ANSWER - the inflow of assets, usually cash or accounts receivable,
resulting from the sale of products or the rendering of services to customers; does not include
gains from the sale of property, plant or equipment
cost of goods sold - CORRECT ANSWER - beginning inventory + additions to inventory
= amount that could have been sold - ending inventory
Questions and CORRECT Answers
accounting - CORRECT ANSWER - classification, analysis and determination of the
appropriate method of reporting the effects of the bookkeeping records in an organization's
financial statements
balance sheet - CORRECT ANSWER - a listing of everything that the organization owns
and everything that it owes at a particular moment in time
accounting equation - CORRECT ANSWER - assets-liabilities= shareholders equity
current assets - CORRECT ANSWER - assets that are expected to be converted into cash,
sold or exchanged within the business's normal operating cycle, usually on eyear
goodwill - CORRECT ANSWER - whenever an acquiring organization pays more than
book value for the acquired organization, the difference between the price paid for the
organization and the book value can be listed as ______ on the balance sheet
receivables - CORRECT ANSWER - amounts owed to a company by customers and other
outsiders
marketable securities - CORRECT ANSWER - temporary investments that can be easily
converted into cash
inventory - CORRECT ANSWER - consists of good available for sale to customers; for a
manufacturing company, also includes raw materials and finished goods
prepaid expenses - CORRECT ANSWER - an asset classification that represents the
amount that has already been paid for services that have not been used or received
, physical depreciation - CORRECT ANSWER - depreciable assets wear and tear over a
period of time
functional depreciation - CORRECT ANSWER - caused by obsolescence or inadequate
performance of the asset
accounting depreciation - CORRECT ANSWER - used to spread the cost of an asset over
its useful economic life
current liabilities - CORRECT ANSWER - payments are reasonably expected to require
cash or creation of other current liabilities in one year; include accounts payable, notes payable,
the estimated amount for income taxes and accruals
accruals - CORRECT ANSWER - obligations that are owed because of the passage of time
but that will be paid in the future
sharehodlers equity - CORRECT ANSWER - net amount of assets after deducting an
organization's debts and obligations (liabilities)
retained earnings - CORRECT ANSWER - the cumulative net income that an organization
has retained, after payment of dividends, for reinvestment in the organizations operations
income statement - CORRECT ANSWER - shows an organization's profit or loss for a
stated period
revenue - CORRECT ANSWER - the inflow of assets, usually cash or accounts receivable,
resulting from the sale of products or the rendering of services to customers; does not include
gains from the sale of property, plant or equipment
cost of goods sold - CORRECT ANSWER - beginning inventory + additions to inventory
= amount that could have been sold - ending inventory
