MBA 620 QUIZ 1 STUDY GUIDE
Historical Cost - Answers -Report activities at their cash value at the time of the
transaction
Fair Market Value - Answers -Report the value of a transaction or asset/liability at the
value that one would receive in the market
Realization - Answers -Receiving or paying cash; cash basis
Recognition - Answers -Recording the transaction based on accounting rules; right to
payment or obligation to pay; accrual basis
Revenue Recognition - Answers -Report revenue when earned and right to payment
Expense Recognition - Answers -Report expense when obligated to pay
Conservatism - Answers -In general, when faced with a decision of equally liked
outcomes choose the one that minimizes profit
Gain recognition - Answers -Only record a gain when it happens
Loss recognition - Answers -Record a loss when its likely to happen
Full and Fair Disclosure: Materiality - Answers -Disclose anything that would affect an
informed investor in making an investment decision
3 forms of business organization - Answers -sole proprietorship, partnership,
corporation
Corporation - Answers -Private/ Public (either profit or not-for-profit)
Capital - Answers -The financial resources to start a business
Securities and Exchange Commission (SEC) - Answers -Government agency that
monitors the stock market and the financial reporting of the frims that trade in the
market
Stock - Answers -Units of ownership in a corporation
For-profit company - Answers -A company with the goal of maximizing the owners'
wealth
Dividends - Answers -Distribution of earnings to the owners of the corporation
Historical Cost - Answers -Report activities at their cash value at the time of the
transaction
Fair Market Value - Answers -Report the value of a transaction or asset/liability at the
value that one would receive in the market
Realization - Answers -Receiving or paying cash; cash basis
Recognition - Answers -Recording the transaction based on accounting rules; right to
payment or obligation to pay; accrual basis
Revenue Recognition - Answers -Report revenue when earned and right to payment
Expense Recognition - Answers -Report expense when obligated to pay
Conservatism - Answers -In general, when faced with a decision of equally liked
outcomes choose the one that minimizes profit
Gain recognition - Answers -Only record a gain when it happens
Loss recognition - Answers -Record a loss when its likely to happen
Full and Fair Disclosure: Materiality - Answers -Disclose anything that would affect an
informed investor in making an investment decision
3 forms of business organization - Answers -sole proprietorship, partnership,
corporation
Corporation - Answers -Private/ Public (either profit or not-for-profit)
Capital - Answers -The financial resources to start a business
Securities and Exchange Commission (SEC) - Answers -Government agency that
monitors the stock market and the financial reporting of the frims that trade in the
market
Stock - Answers -Units of ownership in a corporation
For-profit company - Answers -A company with the goal of maximizing the owners'
wealth
Dividends - Answers -Distribution of earnings to the owners of the corporation
