HBS Core
What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five years.
Although the land under Chad's office building is currently believed to be worth
$500,000, it is recorded at $250,000 because that is the price he paid for it. - answer
Historical Cost Principle
What is the Accounting Equation? - answer Assets = Liabilities + Equity
What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufacturing. AQG
records the purchase as an increase in inventory and an increase in accounts payable.
AQG feels that they will be able to realize the value from the inventory and settle the
obligation to RSI in the weeks to come. - answer “Going Concern" Concept
A "note payable for a bank loan" is an example of a... - answer Liability
The principle of Conservatism, says that a company should choose measurement
methods that anticipate and record _____________ but don't anticipate and record
_____________. - answerfuture losses; future gains
What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies to
finance start-ups in rural areas. However, the government has cut the program recently.
The company reports this situation in its financial statements as this might affect the
decisions of stakeholders. - answerMateriality
Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what type of
account? - answerExpense Account
Sales Revenue & Deferred Revenue decrease with: Debit or Credit? - answerDebit
Cost of Goods Sold, Accounts Receivable, Cash: Increase or Decrease with a Credit -
answerDecrease
These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent - answerDebit
The accounts increase with a debit or credit:
, Sales Revenue, Deferred Revenue - answerCredit
True or False: Transactions are only recorded when there is an exchange of cash -
answerFalse: This is true for Cash Basis Accounting, but not for Accrual Accounting.
The income statement reflects a company's: - answerFinancial performance over a
given period of time
What represents the net income/(loss) for the year? - answerThe difference between
the revenues/gains and expenses/losses.
Income Statement:
Examples of Permanent Accounts - answer-CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
Income Statement:
Examples of Temporary Accounts - answer-COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
Nominal Accounts - answerAccounts that are reset to zero at the end of each
accounting period. Nominal accounts include all revenue and expense accounts, and
may also be referred to as temporary accounts or Income Statement accounts. The net
balance of nominal accounts is transferred to retained earnings at the end of each
accounting period.
Real Accounts - answerAccounts which contain cumulative balances since the inception
of the business. The balances in these accounts flow from one accounting period to the
next. Real accounts include all asset, liability, and owners' equity accounts and may
also be referred to as permanent accounts or Balance Sheet accounts.
Balance Sheet - answerFinancial report that shows the financial position of a company
at a specific point in time; a snapshot of the resources that are owned or controlled by
company, and how those resources were financed. The balance sheet shows the
balance of all asset, liability, and equity accounts as of a given date.
What type of account is 'mortgage payable'? - answerlong term liability account
T-Account - answerA T-account shows all the activity for a given account for a specific
period of time, or in other words, the T-account is the summary of several journal
entries.
How quickly and easily an item can be converted to cash is known as: - answerliquidity
What Accounting Principle Does the Following Represent:
Real Estate prices in Orderville have increased dramatically over the last five years.
Although the land under Chad's office building is currently believed to be worth
$500,000, it is recorded at $250,000 because that is the price he paid for it. - answer
Historical Cost Principle
What is the Accounting Equation? - answer Assets = Liabilities + Equity
What Accounting Principle Does the Following Represent:
AQG Industries purchases $20,000 of product on credit from RSI Manufacturing. AQG
records the purchase as an increase in inventory and an increase in accounts payable.
AQG feels that they will be able to realize the value from the inventory and settle the
obligation to RSI in the weeks to come. - answer “Going Concern" Concept
A "note payable for a bank loan" is an example of a... - answer Liability
The principle of Conservatism, says that a company should choose measurement
methods that anticipate and record _____________ but don't anticipate and record
_____________. - answerfuture losses; future gains
What Accounting Principle Does the Following Represent:
A microfinance institution has been relying on government collateral subsidies to
finance start-ups in rural areas. However, the government has cut the program recently.
The company reports this situation in its financial statements as this might affect the
decisions of stakeholders. - answerMateriality
Cost of Goods Sold, Rent Expense, and Wages Expense are examples of what type of
account? - answerExpense Account
Sales Revenue & Deferred Revenue decrease with: Debit or Credit? - answerDebit
Cost of Goods Sold, Accounts Receivable, Cash: Increase or Decrease with a Credit -
answerDecrease
These accounts increase with a debit or credit:
Cash, Depreciation Expense, Prepaid Rent - answerDebit
The accounts increase with a debit or credit:
, Sales Revenue, Deferred Revenue - answerCredit
True or False: Transactions are only recorded when there is an exchange of cash -
answerFalse: This is true for Cash Basis Accounting, but not for Accrual Accounting.
The income statement reflects a company's: - answerFinancial performance over a
given period of time
What represents the net income/(loss) for the year? - answerThe difference between
the revenues/gains and expenses/losses.
Income Statement:
Examples of Permanent Accounts - answer-CASH AND CASH EQUIVALENTS
-RENT PAYABLE
-INVENTORY
Income Statement:
Examples of Temporary Accounts - answer-COST OF GOODS SOLD
-SALES REVENUE
-RENT EXPENSE
Nominal Accounts - answerAccounts that are reset to zero at the end of each
accounting period. Nominal accounts include all revenue and expense accounts, and
may also be referred to as temporary accounts or Income Statement accounts. The net
balance of nominal accounts is transferred to retained earnings at the end of each
accounting period.
Real Accounts - answerAccounts which contain cumulative balances since the inception
of the business. The balances in these accounts flow from one accounting period to the
next. Real accounts include all asset, liability, and owners' equity accounts and may
also be referred to as permanent accounts or Balance Sheet accounts.
Balance Sheet - answerFinancial report that shows the financial position of a company
at a specific point in time; a snapshot of the resources that are owned or controlled by
company, and how those resources were financed. The balance sheet shows the
balance of all asset, liability, and equity accounts as of a given date.
What type of account is 'mortgage payable'? - answerlong term liability account
T-Account - answerA T-account shows all the activity for a given account for a specific
period of time, or in other words, the T-account is the summary of several journal
entries.
How quickly and easily an item can be converted to cash is known as: - answerliquidity
