MGT 8803 Financial Accounting UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Proprietorship - CORRECT ANSWER - Single Owner; unlimited liability & no taxation
Partnership - CORRECT ANSWER - More than one owner; unlimited liability & no taxation
Corporation - CORRECT ANSWER - A business owned by stockholders (shareholders ->
board of directors --> top managers); limited liability & taxation
Publicly traded or privately held
Assumptions of Financial Accounting - CORRECT ANSWER - Separate entity, unit of
measurement, going concern, periodicity, materiality
Going Concern - CORRECT ANSWER - Presume that the company will continue to operate
& that it will be ongoing
Periodicity - CORRECT ANSWER - Presume that we can arbitrarily pick any time period
that we want to and report the financial results for that time period
Materiality - CORRECT ANSWER - only information that would influence the decisions of a
reasonable person need be disclosed
Users of Financial Reports - CORRECT ANSWER - Investors (Stockholders), Creditors
(Banks), Government agencies (SEC), Company management, financial analysts
, GAAP - CORRECT ANSWER - Generally Accepted Accounting Principles. The standards
and rules that accountants follow while recording and reporting financial activities.
SEC - CORRECT ANSWER - Securities and Exchange Commission; rule making resides
under their authority
IFRS - CORRECT ANSWER - International Financial Reporting Standards
GAAP vs Tax accounting - CORRECT ANSWER - tax accounting is done for the IRS
Qualities of Financial Statements - CORRECT ANSWER - Understandability, timeliness, full
disclosure, comparability, objectivity, decision relevance
Balance sheet - CORRECT ANSWER - measures financial position at a point in time; Assets
= Liabilities + Owners Equity
Accounting equation - CORRECT ANSWER - Assets = Liabilities + Owner's Equity
Assets - CORRECT ANSWER - Resources of the company; resources owned or rights to
receive resources
Liabilities - CORRECT ANSWER - Sources of funding provided by the creditors; creditors
claims
Owners' Equity - CORRECT ANSWER - sources provided by the owners; owner's claims
Liquidity - CORRECT ANSWER - the closer they are to being cash, the more liquid they are
Cost Principle - CORRECT ANSWER - Assets are valued at their historical cost
ACTUAL Exam Questions and CORRECT
Answers
Proprietorship - CORRECT ANSWER - Single Owner; unlimited liability & no taxation
Partnership - CORRECT ANSWER - More than one owner; unlimited liability & no taxation
Corporation - CORRECT ANSWER - A business owned by stockholders (shareholders ->
board of directors --> top managers); limited liability & taxation
Publicly traded or privately held
Assumptions of Financial Accounting - CORRECT ANSWER - Separate entity, unit of
measurement, going concern, periodicity, materiality
Going Concern - CORRECT ANSWER - Presume that the company will continue to operate
& that it will be ongoing
Periodicity - CORRECT ANSWER - Presume that we can arbitrarily pick any time period
that we want to and report the financial results for that time period
Materiality - CORRECT ANSWER - only information that would influence the decisions of a
reasonable person need be disclosed
Users of Financial Reports - CORRECT ANSWER - Investors (Stockholders), Creditors
(Banks), Government agencies (SEC), Company management, financial analysts
, GAAP - CORRECT ANSWER - Generally Accepted Accounting Principles. The standards
and rules that accountants follow while recording and reporting financial activities.
SEC - CORRECT ANSWER - Securities and Exchange Commission; rule making resides
under their authority
IFRS - CORRECT ANSWER - International Financial Reporting Standards
GAAP vs Tax accounting - CORRECT ANSWER - tax accounting is done for the IRS
Qualities of Financial Statements - CORRECT ANSWER - Understandability, timeliness, full
disclosure, comparability, objectivity, decision relevance
Balance sheet - CORRECT ANSWER - measures financial position at a point in time; Assets
= Liabilities + Owners Equity
Accounting equation - CORRECT ANSWER - Assets = Liabilities + Owner's Equity
Assets - CORRECT ANSWER - Resources of the company; resources owned or rights to
receive resources
Liabilities - CORRECT ANSWER - Sources of funding provided by the creditors; creditors
claims
Owners' Equity - CORRECT ANSWER - sources provided by the owners; owner's claims
Liquidity - CORRECT ANSWER - the closer they are to being cash, the more liquid they are
Cost Principle - CORRECT ANSWER - Assets are valued at their historical cost
