Accounting Exam #1 Ch 1-3 ACTUAL UPDATED QUESTIONS AND CORRECT ANSWERS
GAAP concepts and rules that govern financial accounting, aims to make information
relevant, reliable, and comparable
, SEC securities and exchange commission, a government agency, that oversees proper
use of GAAP
FASB financial accounting standards board, a private sector group that sets both broad
and specific principles
IASB international accounting standards board, an independent group (consisting of
individuals from many countries) that issue IFRS (international financial reporting
standards)
Measurement (cost) Principle accounting information is based on actual cost (cash or equal-to-cash basis)
Revenue Recognition Principle provides guidance on when a company must recognize revenue
1) revenue is recognized when earned
2) proceeds from selling products and services need not be in cash
3) revenue is measured by the cash received plus the cash value of any other
items received
Matching (expense recognition) Principle prescribes that a company record the expenses it incurred to generate the
revenue reported
Full Disclosure Principle prescribes that a company report the details behind financial statements that
would impact users' decisions
Going-Concern Assumption accounting information reflects a presumption that the business will continue
operating instead of being closed or sold
Monetary Unit Assumption transactions and events can be expressed in monetary unites
Time Period Assumption presumes that the life of a company can be divided into time periods
Business Entity Assumption a business is accounted for separately from other business entities, including its
owner
Accounting Equation Assets= Liabilities+Owner's Equity
Assets=Liabilites+Common Stock-Dividends+Revenues-Expenses
Income Statement a company's revenues and expenses along with the resulting net income or loss
over a period of time due to earnings activities
-revenues
-expenses
Statement of Retained Earnings explains changes in equity from net income or loss and from any dividends over a
period of time
Balance Sheet describes a company's financial position at a point in time
-assets
-liabilities
-equity
GAAP concepts and rules that govern financial accounting, aims to make information
relevant, reliable, and comparable
, SEC securities and exchange commission, a government agency, that oversees proper
use of GAAP
FASB financial accounting standards board, a private sector group that sets both broad
and specific principles
IASB international accounting standards board, an independent group (consisting of
individuals from many countries) that issue IFRS (international financial reporting
standards)
Measurement (cost) Principle accounting information is based on actual cost (cash or equal-to-cash basis)
Revenue Recognition Principle provides guidance on when a company must recognize revenue
1) revenue is recognized when earned
2) proceeds from selling products and services need not be in cash
3) revenue is measured by the cash received plus the cash value of any other
items received
Matching (expense recognition) Principle prescribes that a company record the expenses it incurred to generate the
revenue reported
Full Disclosure Principle prescribes that a company report the details behind financial statements that
would impact users' decisions
Going-Concern Assumption accounting information reflects a presumption that the business will continue
operating instead of being closed or sold
Monetary Unit Assumption transactions and events can be expressed in monetary unites
Time Period Assumption presumes that the life of a company can be divided into time periods
Business Entity Assumption a business is accounted for separately from other business entities, including its
owner
Accounting Equation Assets= Liabilities+Owner's Equity
Assets=Liabilites+Common Stock-Dividends+Revenues-Expenses
Income Statement a company's revenues and expenses along with the resulting net income or loss
over a period of time due to earnings activities
-revenues
-expenses
Statement of Retained Earnings explains changes in equity from net income or loss and from any dividends over a
period of time
Balance Sheet describes a company's financial position at a point in time
-assets
-liabilities
-equity
