ACC 221 UPDATED COMPREHENSIVE EXAM
QUESTIONS AND ANSWERS SURE A+
✔✔Inventory Turnover Ratio - ✔✔A measure of how many times inventory is sold and
replaced over a period, calculated as cost of goods sold divided by average inventory.
✔✔Average Days in Inventory - ✔✔The average number of days inventory is held
before it is sold, calculated as 365 divided by the inventory turnover ratio.
✔✔Gross Profit Ratio - ✔✔A financial metric calculated as gross profit divided by net
sales, indicating the percentage of revenue that exceeds the cost of goods sold.
✔✔Multi-Step Income Statement - ✔✔An income statement that separates operating
revenues and expenses from non-operating items.
✔✔Tangible Assets - ✔✔Physical assets such as land, buildings, and equipment that
have a finite lifespan.
✔✔Intangible Assets - ✔✔Non-physical assets such as patents, trademarks, and
goodwill.
✔✔Depreciation - ✔✔The allocation of an asset's cost as an expense over its useful life.
,✔✔Salvage Value - ✔✔The estimated residual value of an asset at the end of its useful
life.
✔✔Amortization - ✔✔The process of allocating the cost of an intangible asset over its
useful life.
✔✔Return on Assets - ✔✔A financial ratio calculated as net income divided by average
total assets, indicating how efficiently a company uses its assets to generate profit.
✔✔Profit Margin - ✔✔A financial metric that indicates the earnings generated per dollar
of sales.
✔✔Asset Turnover - ✔✔A measure of how efficiently a company uses its assets to
generate sales, calculated as sales divided by average total assets.
✔✔Deferred Revenues - ✔✔Cash received before revenue is earned, representing a
liability until the revenue is recognized.
✔✔Prepaid Expenses - ✔✔Cash paid for expenses that will be incurred in the future,
recognized as an asset until the expense is incurred.
✔✔Accounting Equation - ✔✔The fundamental equation of accounting, stating that
assets equal liabilities plus equity.
✔✔Expanded Accounting Equation - ✔✔An extension of the accounting equation that
includes common stock and retained earnings.
✔✔Liabilities - ✔✔Obligations owed to creditors, representing claims against a
company's assets.
✔✔Equity - ✔✔The residual interest in the assets of a company after deducting
liabilities, representing owner claims.
✔✔Operating Activities - ✔✔Day-to-day activities that generate net income, including
revenues and expenses.
✔✔Investing Activities - ✔✔Transactions involving the purchase or sale of long-term
assets, such as equipment and land.
✔✔Financing Activities - ✔✔Transactions with owners or lenders, including issuing
stock, borrowing, and paying dividends.
✔✔Income Statement - ✔✔A financial statement that reports revenues, expenses, and
net income for a specific period.
, ✔✔Statement of Retained Earnings - ✔✔A financial statement that explains changes in
retained earnings during a period.
✔✔Balance Sheet - ✔✔A financial statement that reports a company's assets, liabilities,
and equity at a specific point in time.
✔✔Statement of Cash Flows - ✔✔A financial statement that reports cash inflows and
outflows from operating, investing, and financing activities.
✔✔Dividends - ✔✔Distributions to shareholders that reduce retained earnings.
✔✔Contra Asset - ✔✔An asset account that reduces the balance of another asset, such
as accumulated depreciation.
✔✔Cash-Basis Accounting - ✔✔An accounting method where revenues are recorded
when cash is received and expenses when cash is paid.
✔✔Accrual-Basis Accounting - ✔✔An accounting method where revenues are recorded
when earned and expenses when incurred.
✔✔Accrued Expenses - ✔✔Expenses that have been incurred but not yet paid, such as
salaries payable.
✔✔Accrued Revenues - ✔✔Revenues that have been earned but not yet billed to
customers.
✔✔Effect of Missing Accrued Expense - ✔✔Net income is overstated and liabilities are
understated.
✔✔Depreciation Expense - ✔✔The allocation of an asset's cost over its useful life.
✔✔Accumulated Depreciation - ✔✔A contra-asset account that reduces the book value
of an asset.
✔✔Book Value - ✔✔The value of an asset calculated as asset cost minus accumulated
depreciation.
✔✔Statement Relationships - ✔✔Net income flows into retained earnings, and
dividends reduce retained earnings.
✔✔Balance Sheet → Statement of Cash Flows - ✔✔Ending cash comes from cash
flows reported in the statement.
QUESTIONS AND ANSWERS SURE A+
✔✔Inventory Turnover Ratio - ✔✔A measure of how many times inventory is sold and
replaced over a period, calculated as cost of goods sold divided by average inventory.
✔✔Average Days in Inventory - ✔✔The average number of days inventory is held
before it is sold, calculated as 365 divided by the inventory turnover ratio.
✔✔Gross Profit Ratio - ✔✔A financial metric calculated as gross profit divided by net
sales, indicating the percentage of revenue that exceeds the cost of goods sold.
✔✔Multi-Step Income Statement - ✔✔An income statement that separates operating
revenues and expenses from non-operating items.
✔✔Tangible Assets - ✔✔Physical assets such as land, buildings, and equipment that
have a finite lifespan.
✔✔Intangible Assets - ✔✔Non-physical assets such as patents, trademarks, and
goodwill.
✔✔Depreciation - ✔✔The allocation of an asset's cost as an expense over its useful life.
,✔✔Salvage Value - ✔✔The estimated residual value of an asset at the end of its useful
life.
✔✔Amortization - ✔✔The process of allocating the cost of an intangible asset over its
useful life.
✔✔Return on Assets - ✔✔A financial ratio calculated as net income divided by average
total assets, indicating how efficiently a company uses its assets to generate profit.
✔✔Profit Margin - ✔✔A financial metric that indicates the earnings generated per dollar
of sales.
✔✔Asset Turnover - ✔✔A measure of how efficiently a company uses its assets to
generate sales, calculated as sales divided by average total assets.
✔✔Deferred Revenues - ✔✔Cash received before revenue is earned, representing a
liability until the revenue is recognized.
✔✔Prepaid Expenses - ✔✔Cash paid for expenses that will be incurred in the future,
recognized as an asset until the expense is incurred.
✔✔Accounting Equation - ✔✔The fundamental equation of accounting, stating that
assets equal liabilities plus equity.
✔✔Expanded Accounting Equation - ✔✔An extension of the accounting equation that
includes common stock and retained earnings.
✔✔Liabilities - ✔✔Obligations owed to creditors, representing claims against a
company's assets.
✔✔Equity - ✔✔The residual interest in the assets of a company after deducting
liabilities, representing owner claims.
✔✔Operating Activities - ✔✔Day-to-day activities that generate net income, including
revenues and expenses.
✔✔Investing Activities - ✔✔Transactions involving the purchase or sale of long-term
assets, such as equipment and land.
✔✔Financing Activities - ✔✔Transactions with owners or lenders, including issuing
stock, borrowing, and paying dividends.
✔✔Income Statement - ✔✔A financial statement that reports revenues, expenses, and
net income for a specific period.
, ✔✔Statement of Retained Earnings - ✔✔A financial statement that explains changes in
retained earnings during a period.
✔✔Balance Sheet - ✔✔A financial statement that reports a company's assets, liabilities,
and equity at a specific point in time.
✔✔Statement of Cash Flows - ✔✔A financial statement that reports cash inflows and
outflows from operating, investing, and financing activities.
✔✔Dividends - ✔✔Distributions to shareholders that reduce retained earnings.
✔✔Contra Asset - ✔✔An asset account that reduces the balance of another asset, such
as accumulated depreciation.
✔✔Cash-Basis Accounting - ✔✔An accounting method where revenues are recorded
when cash is received and expenses when cash is paid.
✔✔Accrual-Basis Accounting - ✔✔An accounting method where revenues are recorded
when earned and expenses when incurred.
✔✔Accrued Expenses - ✔✔Expenses that have been incurred but not yet paid, such as
salaries payable.
✔✔Accrued Revenues - ✔✔Revenues that have been earned but not yet billed to
customers.
✔✔Effect of Missing Accrued Expense - ✔✔Net income is overstated and liabilities are
understated.
✔✔Depreciation Expense - ✔✔The allocation of an asset's cost over its useful life.
✔✔Accumulated Depreciation - ✔✔A contra-asset account that reduces the book value
of an asset.
✔✔Book Value - ✔✔The value of an asset calculated as asset cost minus accumulated
depreciation.
✔✔Statement Relationships - ✔✔Net income flows into retained earnings, and
dividends reduce retained earnings.
✔✔Balance Sheet → Statement of Cash Flows - ✔✔Ending cash comes from cash
flows reported in the statement.
