WSP Accounting Crash Course Exam
questions with correct anwers
Income |statement |& |why |its |important |- |VERIFIED |ANSWER✔✔-financial |report |that |depicts |the |
operating |performance |of |a |company |over |a |specific |period |of |time
Its |important |because |it |facilitates |the |analysis |of |a |company's |growth |prospects, |cost |structure |and |
profitability
Analysts |an |use |the |IS |to |identify |the |components |and |sources |(drivers) |of |net |earnings
****also |referred |to |as |consolidated |statement |of |earnings, |the |profits |and |loss |statement, |statement
|of |revenues |and |expenses
Revenue |(top |line |on |IS) |- |VERIFIED |ANSWER✔✔-Revenue |represents |proceeds |from |the |sale |of |
goods |and |services |produced |or |offered |by |a |company; |revenue |is |referred |to |company |top |line. |
A |company |can |have |other |income |not |tied |to |core |operations |(income |for |legal |settlements, |cash |
collected, |etc)
Accrual |basis |is |revenue |must |be |recorded |only |when |it |is |earned |and |measurable |- |VERIFIED |
ANSWER✔✔-According |to |the |revenue |recognition |principle, |a |company |cannot |record |revenue |until |
it |is |earned |-- |that |is, |until |that |order |is |shipped |to |a |customer |and |collection |from |that |customer, |
who |used |a |CC, |is |reasonably |assured
Revenue |Recognition |Method |1: |Multiple |deliverables |- |VERIFIED |ANSWER✔✔-Fo |sales |of |bundles |
products, |companies |should |assign |individual |values |to |each |of |the |bundled |components |→ |this |is |
especially |relevant |in |the |software |industry
ex: |apple |selling |iphone |that |has |price |of |hardware |+ |software |rights |--> |recognize |revenue |of |
hardware |immediately, |but |recognize |software |revenue |evenly |over |several |yrs
Revenue |Recognition |Method |2: |Long-term |projects |- |VERIFIED |ANSWER✔✔-Multiple |methods:
, 1: |percentage |of |completion |method: |revenues |are |recognized |on |the |basis |of |the |% |of |total |work |
completed |during |the |accounting |period |(eg |Boeing |plan |example)
2: |completed |contract |method: |rarely |used |in |US, |this |method |allows |for |revenue |recognition |only |
once |the |entire |project |has |been |completed
Recall |matching |principle |in |relation |to |revenue |and |expense |recognition |- |VERIFIED |ANSWER✔✔-
States |that |expenses |should |be |matched |to |revenues |
Revenues |are |recognized |and |recorded |when |an |economic |exchange |occurs, |while |expenses |are |
recognized |when |the |associated |revenues |are |recognized, |not |necessarily |when |cash |is |exchanged
Accrual |vs |cash |accounting |- |VERIFIED |ANSWER✔✔-Cash |accounting |objectively |recognizes |revenues |
when |cash |is |received |and |records |costs |when |cash |is |paid |out; |accrual |accounting |involves |
subjectivity |in |regards |to |the |allocation |of |revenues |and |expenses |to |different |periods
Cash |accounting |is |not |allowed |under |GAAP, |but |for |tax |reporting |certain |businesses |are |allowed |to |
use |cash |basis
Non |operating |vs |operating |income |and |expenses |on |the |IS |- |VERIFIED |ANSWER✔✔-operating: |
income |and |expenses |generated |and |incurred |from |a |company's |core |operations
nonoperating: |income |and |expenses |that |are |not |tied |to |core |operations |of |business
Everything |below |operating |profit |(income) |is |not |directly |related |to |operations |of |the |business; |
everything |above |is |tied |to |core |ops
Cost |of |Goods |Sold |(COGS)/Cost |of |Sales |(line |item |on |IS) |- |VERIFIED |ANSWER✔✔-represents |a |
company's |DIRECT |cost |of |manufacture |(for |manufacturers) |or |procurement |(for |merchandisers) |of |a |
good |or |service |that |the |company |sells |to |GENERATE |REVENUE
COGS |is |a |direct |operating |costs
questions with correct anwers
Income |statement |& |why |its |important |- |VERIFIED |ANSWER✔✔-financial |report |that |depicts |the |
operating |performance |of |a |company |over |a |specific |period |of |time
Its |important |because |it |facilitates |the |analysis |of |a |company's |growth |prospects, |cost |structure |and |
profitability
Analysts |an |use |the |IS |to |identify |the |components |and |sources |(drivers) |of |net |earnings
****also |referred |to |as |consolidated |statement |of |earnings, |the |profits |and |loss |statement, |statement
|of |revenues |and |expenses
Revenue |(top |line |on |IS) |- |VERIFIED |ANSWER✔✔-Revenue |represents |proceeds |from |the |sale |of |
goods |and |services |produced |or |offered |by |a |company; |revenue |is |referred |to |company |top |line. |
A |company |can |have |other |income |not |tied |to |core |operations |(income |for |legal |settlements, |cash |
collected, |etc)
Accrual |basis |is |revenue |must |be |recorded |only |when |it |is |earned |and |measurable |- |VERIFIED |
ANSWER✔✔-According |to |the |revenue |recognition |principle, |a |company |cannot |record |revenue |until |
it |is |earned |-- |that |is, |until |that |order |is |shipped |to |a |customer |and |collection |from |that |customer, |
who |used |a |CC, |is |reasonably |assured
Revenue |Recognition |Method |1: |Multiple |deliverables |- |VERIFIED |ANSWER✔✔-Fo |sales |of |bundles |
products, |companies |should |assign |individual |values |to |each |of |the |bundled |components |→ |this |is |
especially |relevant |in |the |software |industry
ex: |apple |selling |iphone |that |has |price |of |hardware |+ |software |rights |--> |recognize |revenue |of |
hardware |immediately, |but |recognize |software |revenue |evenly |over |several |yrs
Revenue |Recognition |Method |2: |Long-term |projects |- |VERIFIED |ANSWER✔✔-Multiple |methods:
, 1: |percentage |of |completion |method: |revenues |are |recognized |on |the |basis |of |the |% |of |total |work |
completed |during |the |accounting |period |(eg |Boeing |plan |example)
2: |completed |contract |method: |rarely |used |in |US, |this |method |allows |for |revenue |recognition |only |
once |the |entire |project |has |been |completed
Recall |matching |principle |in |relation |to |revenue |and |expense |recognition |- |VERIFIED |ANSWER✔✔-
States |that |expenses |should |be |matched |to |revenues |
Revenues |are |recognized |and |recorded |when |an |economic |exchange |occurs, |while |expenses |are |
recognized |when |the |associated |revenues |are |recognized, |not |necessarily |when |cash |is |exchanged
Accrual |vs |cash |accounting |- |VERIFIED |ANSWER✔✔-Cash |accounting |objectively |recognizes |revenues |
when |cash |is |received |and |records |costs |when |cash |is |paid |out; |accrual |accounting |involves |
subjectivity |in |regards |to |the |allocation |of |revenues |and |expenses |to |different |periods
Cash |accounting |is |not |allowed |under |GAAP, |but |for |tax |reporting |certain |businesses |are |allowed |to |
use |cash |basis
Non |operating |vs |operating |income |and |expenses |on |the |IS |- |VERIFIED |ANSWER✔✔-operating: |
income |and |expenses |generated |and |incurred |from |a |company's |core |operations
nonoperating: |income |and |expenses |that |are |not |tied |to |core |operations |of |business
Everything |below |operating |profit |(income) |is |not |directly |related |to |operations |of |the |business; |
everything |above |is |tied |to |core |ops
Cost |of |Goods |Sold |(COGS)/Cost |of |Sales |(line |item |on |IS) |- |VERIFIED |ANSWER✔✔-represents |a |
company's |DIRECT |cost |of |manufacture |(for |manufacturers) |or |procurement |(for |merchandisers) |of |a |
good |or |service |that |the |company |sells |to |GENERATE |REVENUE
COGS |is |a |direct |operating |costs
