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ACCT 2000 EXAM 1 LSU ACTUAL QUESTIONS
& CORRECT ANSWERS
Economic entity assumption-correct-answer-Every economic entity can be
separately identified and accounted for
Periodicity assumption-correct-answer-States that the life of a business can be
divided into time periods
Going concern assumption-correct-answer-The business will remain in operation
for foreseeable future
Accrual accounting-correct-answer-Transactions that change a company's
financial statements are recorded in the periods in which the events occur
Cost principle-correct-answer-Dictates companies record assets at their cost.
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Fair value principle-correct-answer-If the value starts changing, you would change
the value on balance sheet
Accounting-correct-answer-The info system that identifies, records, and
communicates the economic events of an organization to interested users
Internal users (inside the company)-correct-answer-Managers, supervisors, CEO,
CFO, board members
External (outside the company)-correct-answer-Investors, stockholders, creditors,
banks
Effective financial reporting depends on-correct-answer-ethical behavior
Sarbanes-Oxley Act in 2002 (after Enron)-correct-answer-CEO/CFO must verify on
reports, severe penalties for fraud, increased auditor duties
Financing activities-correct-answer-Borrow money (liabilities, notes payable,
bonds payable), issue shares of stock (dividends)
ACCT 2000 EXAM 1 LSU ACTUAL QUESTIONS
& CORRECT ANSWERS
Economic entity assumption-correct-answer-Every economic entity can be
separately identified and accounted for
Periodicity assumption-correct-answer-States that the life of a business can be
divided into time periods
Going concern assumption-correct-answer-The business will remain in operation
for foreseeable future
Accrual accounting-correct-answer-Transactions that change a company's
financial statements are recorded in the periods in which the events occur
Cost principle-correct-answer-Dictates companies record assets at their cost.
, 2|Page
Fair value principle-correct-answer-If the value starts changing, you would change
the value on balance sheet
Accounting-correct-answer-The info system that identifies, records, and
communicates the economic events of an organization to interested users
Internal users (inside the company)-correct-answer-Managers, supervisors, CEO,
CFO, board members
External (outside the company)-correct-answer-Investors, stockholders, creditors,
banks
Effective financial reporting depends on-correct-answer-ethical behavior
Sarbanes-Oxley Act in 2002 (after Enron)-correct-answer-CEO/CFO must verify on
reports, severe penalties for fraud, increased auditor duties
Financing activities-correct-answer-Borrow money (liabilities, notes payable,
bonds payable), issue shares of stock (dividends)
