ACC 231 Exam #2 Question and
answers verified to pass 2025/2026
Finished Goods - correct answer ✔Inventory of goods ready to sell.
Raw Materials - correct answer ✔Inventory items used in the production of goods.
Work In Process - correct answer ✔Inventory of partially completed goods.
Specific-identification - correct answer ✔Inventory costing metod in which a business uses the specific
cost of each unit of inventory; also called the specific-unit-cost method.
FIFO - correct answer ✔Inventory costing method in which the first inventory costs incurred are the
first costs to be assigned to cost of goods sold. FIFO leaves in ending inventory the last, most recent,
costs incurred.
LIFO - correct answer ✔Inventory costing method in which the last inventory costs incurred are the first
costs to be assigned to cost of goods sold. LIFO leaves in ending inventory the first, the oldest, costs
incurred.
Average Cost - correct answer ✔Inventory costing method where, after each purchase of inventory, a
new weighted average cost per unit is computed and is used to value ending inventory and cos of goods
sold.
Inventory Layer - correct answer ✔A record of the quantity of and the cost of inventory items made in
a single purchase.
Cost of Goods Available for Sale - correct answer ✔The cost of inventory on hand at the beginning of
the period plus the net cost of inventory purchased during the period.
, Perpetual Inventory Record - correct answer ✔A record that tracks the quantity of, and cost of assigned
to, inventory items as they are purchased and sold.
Consistency Principle - correct answer ✔Accounting principle that states that a business should use the
same accounting methods and procedures from period to period.
Conservatism - correct answer ✔Accounting principle that states that a business must report all items
in the financial statements at amounts that lead to the most cautious immediate results.
LCM Rule - correct answer ✔The rule that a business must report inventory in the financial statements
at whichever is lower, the historical cost or the market value, of each inventory item.
Materiality - correct answer ✔Accounting principle that states that a company must perform strictly
proper accounting only for items that are significant for the business's financial statements. Information
is significant, or material, when its presentation in the financial statements would cause someone to
change a decision.
Full-Disclosure Principle - correct answer ✔Accounting principle that states that a company's financial
statements should report enough information for users to make knowledgeable decisions about the
company.
Footnotes - correct answer ✔Disclosures that accompany the financial statements.
Inventory Shrinkage - correct answer ✔The loss of inventory.
Gross Profit Method - correct answer ✔A way to estimate ending inventory by using the gross profit
percentage.
answers verified to pass 2025/2026
Finished Goods - correct answer ✔Inventory of goods ready to sell.
Raw Materials - correct answer ✔Inventory items used in the production of goods.
Work In Process - correct answer ✔Inventory of partially completed goods.
Specific-identification - correct answer ✔Inventory costing metod in which a business uses the specific
cost of each unit of inventory; also called the specific-unit-cost method.
FIFO - correct answer ✔Inventory costing method in which the first inventory costs incurred are the
first costs to be assigned to cost of goods sold. FIFO leaves in ending inventory the last, most recent,
costs incurred.
LIFO - correct answer ✔Inventory costing method in which the last inventory costs incurred are the first
costs to be assigned to cost of goods sold. LIFO leaves in ending inventory the first, the oldest, costs
incurred.
Average Cost - correct answer ✔Inventory costing method where, after each purchase of inventory, a
new weighted average cost per unit is computed and is used to value ending inventory and cos of goods
sold.
Inventory Layer - correct answer ✔A record of the quantity of and the cost of inventory items made in
a single purchase.
Cost of Goods Available for Sale - correct answer ✔The cost of inventory on hand at the beginning of
the period plus the net cost of inventory purchased during the period.
, Perpetual Inventory Record - correct answer ✔A record that tracks the quantity of, and cost of assigned
to, inventory items as they are purchased and sold.
Consistency Principle - correct answer ✔Accounting principle that states that a business should use the
same accounting methods and procedures from period to period.
Conservatism - correct answer ✔Accounting principle that states that a business must report all items
in the financial statements at amounts that lead to the most cautious immediate results.
LCM Rule - correct answer ✔The rule that a business must report inventory in the financial statements
at whichever is lower, the historical cost or the market value, of each inventory item.
Materiality - correct answer ✔Accounting principle that states that a company must perform strictly
proper accounting only for items that are significant for the business's financial statements. Information
is significant, or material, when its presentation in the financial statements would cause someone to
change a decision.
Full-Disclosure Principle - correct answer ✔Accounting principle that states that a company's financial
statements should report enough information for users to make knowledgeable decisions about the
company.
Footnotes - correct answer ✔Disclosures that accompany the financial statements.
Inventory Shrinkage - correct answer ✔The loss of inventory.
Gross Profit Method - correct answer ✔A way to estimate ending inventory by using the gross profit
percentage.
