ACG 4101 Exam 1 Questions With Correct
Answers
1. Who Sets Accounting Standards in the U.S.? - CORRECT ANSWER✔✔-
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The Financial Accounting Standards Board (FASB) sets accounting
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standards in the U.S. under Generally Accepted Accounting Principles
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(GAAP). FASB operates under the authority of the SEC and Congress.
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2. Activity Ratio (What It Shows) - CORRECT ANSWER✔✔-Activity ratios
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measure how efficiently a company manages its assets. High ratios
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indicate that fewer assets are needed to generate revenue, though
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excessively high ratios can suggest overtrading.
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Asset Turnover Ratio: Net Sales / Average Total Assets
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Receivables Turnover Ratio: Net Credit Sales / Average Accounts
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Receivable
Inventory Turnover Ratio: COGS / Average Inventory
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3. Transaction: Record Entry "You receive something from someone on
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account and you will pay later - CORRECT ANSWER✔✔-Journal Entry:
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Inventory (or other specific asset); Accounts Payable or
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Cash; Note Payable
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, 5. Matching Principal Definition - CORRECT ANSWER✔✔-The matching
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principle requires that expenses be recorded in the same period as the
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revenues they help to generate.
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Expenses should be matched with the revenues they generate.
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7. Purpose of Closing Entries - CORRECT ANSWER✔✔-Closing entries
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are made at the end of an accounting period to close temporary
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accounts (e.g., revenues and expenses) and transfer net income to
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retained earnings.
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Closing entries reset temporary accounts to prepare for the next period.
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8. Types of Audit Opinions - CORRECT ANSWER✔✔-Unqualified,
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Qualified, Adverse, Disclaimer
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Unqualified: Clean opinion, no issues | | | |
Qualified: Mostly correct, with some exceptions
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Adverse: Financial statements do not reflect the company's actual
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position
Disclaimer: Auditor cannot give an opinion
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Answers
1. Who Sets Accounting Standards in the U.S.? - CORRECT ANSWER✔✔-
| | | | | | | | | |
The Financial Accounting Standards Board (FASB) sets accounting
| | | | | | | |
standards in the U.S. under Generally Accepted Accounting Principles
| | | | | | | | |
(GAAP). FASB operates under the authority of the SEC and Congress.
| | | | | | | | | |
2. Activity Ratio (What It Shows) - CORRECT ANSWER✔✔-Activity ratios
| | | | | | | | | |
measure how efficiently a company manages its assets. High ratios
| | | | | | | | | |
indicate that fewer assets are needed to generate revenue, though
| | | | | | | | | |
excessively high ratios can suggest overtrading.
| | | | |
Asset Turnover Ratio: Net Sales / Average Total Assets
| | | | | | | |
Receivables Turnover Ratio: Net Credit Sales / Average Accounts
| | | | | | | | |
Receivable
Inventory Turnover Ratio: COGS / Average Inventory
| | | | | |
3. Transaction: Record Entry "You receive something from someone on
| | | | | | | | | |
account and you will pay later - CORRECT ANSWER✔✔-Journal Entry:
| | | | | | | | |
Inventory (or other specific asset); Accounts Payable or
| | | | | | |
Cash; Note Payable
| |
, 5. Matching Principal Definition - CORRECT ANSWER✔✔-The matching
| | | | | | | |
principle requires that expenses be recorded in the same period as the
| | | | | | | | | | | |
revenues they help to generate.
| | | | |
Expenses should be matched with the revenues they generate.
| | | | | | | |
7. Purpose of Closing Entries - CORRECT ANSWER✔✔-Closing entries
| | | | | | | | |
are made at the end of an accounting period to close temporary
| | | | | | | | | | | |
accounts (e.g., revenues and expenses) and transfer net income to
| | | | | | | | | |
retained earnings.
|
Closing entries reset temporary accounts to prepare for the next period.
| | | | | | | | | |
8. Types of Audit Opinions - CORRECT ANSWER✔✔-Unqualified,
| | | | | | | |
Qualified, Adverse, Disclaimer
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Unqualified: Clean opinion, no issues | | | |
Qualified: Mostly correct, with some exceptions
| | | | |
Adverse: Financial statements do not reflect the company's actual
| | | | | | | | |
position
Disclaimer: Auditor cannot give an opinion
| | | | |
