HBX Core Financial Accounting Exam | Verified Exam Questions and
Answers | Latest Updated Study Material 2026
Question:
Accelerated Depreciation Methods
Answer:
Depreciation methods that
recognize more depreciation expense in the early years and less in the later years. Double-
declining balance is an example of an accelerated depreciation method.
Question:
Accounting Equation
Answer:
Assets = Liabilities + Owners' Equity.
This equation is fundamental and must always be true in double entry accounting.
Question:
Accounting Period
Answer:
The period of time for which the financial
results are reported; typically either a month or a quarter or a year.
Question:
Accounts Payable
Answer:
Liability account used to show the obligation
to pay suppliers who have provided goods or services on credit terms.
Question:
Accounts Payable Turnover
Answer:
Accounts Payable Turnover is a
ratio that is used to measure how efficiently a business is paying its vendors. It is calculated by
dividing the credit purchases for the period by the average accounts payable balance for the
period. In the absence of credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts payable turned over during the
,period. For most ratios in this course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use beginning or ending balances.
Question:
Accounts Receivable
Answer:
Asset account used to show the claim to
receive cash at some future date for goods or services that have been supplied to a customer on
credit terms.
Question:
Accounts Receivable Turnover
Answer:
Accounts Receivable Turnover
is a ratio that is used to measure how efficiently a business is collecting receivables from its
customers. It is calculated by dividing the credit sales for the period by the average accounts
receivable balance for the period. In the absence of credit sales information, we may use total
Question:
sales as a substitute. The ratio represents how many times the accounts receivable turned over
during the period. For most ratios in this course, we use averages when calculating ratios with
balance sheet numbers, but this is not necessary and some may choose to use beginning or
ending balances.
Accrual
Answer:
A revenue amount that is recorded after the revenue is
earned but before the payment is received or an expense amount that is recorded after it has been
incurred but before the payment has been made. In either case, for an accrual the exchange of
cash is expected at some future point after the initial revenue or expense is recognized.
Question:
Accrual Accounting Method
Answer:
This is the accounting method
taught in this course, followed by most companies, and required under US GAAP and IFRS. The
method follows the revenue recognition principle, which says that revenue should be recognized
in the period in which it is earned and realizable, not necessarily when the cash is received and
the matching principle which says that expenses should be recognized in the period in which the
,related revenue is recognized rather than when the related cash is paid.
Question:
Accrued Expenses
Answer:
Liability account used to record amounts at
the end of an accounting period to recognize expenses that were incurred in the period but for
which no invoice has yet been received nor payment has yet been made. Examples are
salaries/wages payable, accrued rent expense, accrued legal fees. When the accrual is made, the
debit is to the appropriate expense account (payroll expense, rent expense, legal expense) and the
credit is to the accrued expense account, which is a liability because it represents an obligation
which will need to be paid in the future. Remember accrued expenses are NOT expenses.
Question:
Accrued Liability
Answer:
Liability accounts that record expenses that
have been recognized on the income statement but have not yet been paid. Similar to accrued
expenses.
Question:
Accrued Payroll
Answer:
An accrued expense recorded at the end of a
financial period for amounts of payroll that have been worked but not yet paid. It is a common
type of accrued expense. See also Salaries/Wages Payable.
Question:
Accrued Revenue
Answer:
An asset account that records revenue that has
been earned and recognized on the income statement but not yet paid for by the customer. At the
time of the accrual, we debit the receivable account and credit the appropriate accrued revenue
Question:
account. When the cash transfer ultimately occurs, we debit the cash account and credit the
receivable account.
Accumulated Depreciation
, Answer:
A contra asset account that includes
the cumulative total of all depreciation expenses recorded to date for specific assets. The credit
balance in this account offsets the debit balance in the asset account which shows the original
value of the asset. When the original asset value is netted against the accumulated depreciation
for the asset you arrive at the net book value of the asset.
Question:
Accumulated other comprehensive income
Answer:
An equity account
that consists of cumulative unrealized gains or losses on line items classified under other
comprehensive income. It includes items such as unrealized gains or losses on investments
available for sale, foreign currency gains or losses, and pension plan gains or losses.
Question:
Adjusting (Journal) Entries
Answer:
Entries made to adjust the balances
of asset and liability accounts to reflect changes in their values due to the passage of time or
another implicit transaction.
Question:
Allowance for Doubtful Accounts
Answer:
A contra asset account that
nets against Accounts Receivable. It is generally set up as an estimate of accounts that will
ultimately prove to be uncollectible. It is then reduced when accounts are written off. It may be
adjusted at period end to reflect any updated estimates. May also be referred to as Reserve for
Bad Debts.
Question:
Amortization
Answer:
The method for recognizing the expense of long-
lived intangible assets such as patents, copyrights, and brands, over the life of the assets.
Amortization is usually calculated similar to straight-line depreciation. Some companies use an
accumulated amortization account, while other companies may directly reduce the value of the
Answers | Latest Updated Study Material 2026
Question:
Accelerated Depreciation Methods
Answer:
Depreciation methods that
recognize more depreciation expense in the early years and less in the later years. Double-
declining balance is an example of an accelerated depreciation method.
Question:
Accounting Equation
Answer:
Assets = Liabilities + Owners' Equity.
This equation is fundamental and must always be true in double entry accounting.
Question:
Accounting Period
Answer:
The period of time for which the financial
results are reported; typically either a month or a quarter or a year.
Question:
Accounts Payable
Answer:
Liability account used to show the obligation
to pay suppliers who have provided goods or services on credit terms.
Question:
Accounts Payable Turnover
Answer:
Accounts Payable Turnover is a
ratio that is used to measure how efficiently a business is paying its vendors. It is calculated by
dividing the credit purchases for the period by the average accounts payable balance for the
period. In the absence of credit purchases information, we may use cost of goods sold as a
substitute. The ratio represents how many times the accounts payable turned over during the
,period. For most ratios in this course, we use averages when calculating ratios with balance sheet
numbers, but this is not necessary and some may choose to use beginning or ending balances.
Question:
Accounts Receivable
Answer:
Asset account used to show the claim to
receive cash at some future date for goods or services that have been supplied to a customer on
credit terms.
Question:
Accounts Receivable Turnover
Answer:
Accounts Receivable Turnover
is a ratio that is used to measure how efficiently a business is collecting receivables from its
customers. It is calculated by dividing the credit sales for the period by the average accounts
receivable balance for the period. In the absence of credit sales information, we may use total
Question:
sales as a substitute. The ratio represents how many times the accounts receivable turned over
during the period. For most ratios in this course, we use averages when calculating ratios with
balance sheet numbers, but this is not necessary and some may choose to use beginning or
ending balances.
Accrual
Answer:
A revenue amount that is recorded after the revenue is
earned but before the payment is received or an expense amount that is recorded after it has been
incurred but before the payment has been made. In either case, for an accrual the exchange of
cash is expected at some future point after the initial revenue or expense is recognized.
Question:
Accrual Accounting Method
Answer:
This is the accounting method
taught in this course, followed by most companies, and required under US GAAP and IFRS. The
method follows the revenue recognition principle, which says that revenue should be recognized
in the period in which it is earned and realizable, not necessarily when the cash is received and
the matching principle which says that expenses should be recognized in the period in which the
,related revenue is recognized rather than when the related cash is paid.
Question:
Accrued Expenses
Answer:
Liability account used to record amounts at
the end of an accounting period to recognize expenses that were incurred in the period but for
which no invoice has yet been received nor payment has yet been made. Examples are
salaries/wages payable, accrued rent expense, accrued legal fees. When the accrual is made, the
debit is to the appropriate expense account (payroll expense, rent expense, legal expense) and the
credit is to the accrued expense account, which is a liability because it represents an obligation
which will need to be paid in the future. Remember accrued expenses are NOT expenses.
Question:
Accrued Liability
Answer:
Liability accounts that record expenses that
have been recognized on the income statement but have not yet been paid. Similar to accrued
expenses.
Question:
Accrued Payroll
Answer:
An accrued expense recorded at the end of a
financial period for amounts of payroll that have been worked but not yet paid. It is a common
type of accrued expense. See also Salaries/Wages Payable.
Question:
Accrued Revenue
Answer:
An asset account that records revenue that has
been earned and recognized on the income statement but not yet paid for by the customer. At the
time of the accrual, we debit the receivable account and credit the appropriate accrued revenue
Question:
account. When the cash transfer ultimately occurs, we debit the cash account and credit the
receivable account.
Accumulated Depreciation
, Answer:
A contra asset account that includes
the cumulative total of all depreciation expenses recorded to date for specific assets. The credit
balance in this account offsets the debit balance in the asset account which shows the original
value of the asset. When the original asset value is netted against the accumulated depreciation
for the asset you arrive at the net book value of the asset.
Question:
Accumulated other comprehensive income
Answer:
An equity account
that consists of cumulative unrealized gains or losses on line items classified under other
comprehensive income. It includes items such as unrealized gains or losses on investments
available for sale, foreign currency gains or losses, and pension plan gains or losses.
Question:
Adjusting (Journal) Entries
Answer:
Entries made to adjust the balances
of asset and liability accounts to reflect changes in their values due to the passage of time or
another implicit transaction.
Question:
Allowance for Doubtful Accounts
Answer:
A contra asset account that
nets against Accounts Receivable. It is generally set up as an estimate of accounts that will
ultimately prove to be uncollectible. It is then reduced when accounts are written off. It may be
adjusted at period end to reflect any updated estimates. May also be referred to as Reserve for
Bad Debts.
Question:
Amortization
Answer:
The method for recognizing the expense of long-
lived intangible assets such as patents, copyrights, and brands, over the life of the assets.
Amortization is usually calculated similar to straight-line depreciation. Some companies use an
accumulated amortization account, while other companies may directly reduce the value of the
