ACCT 207 FINAL EXAM ACCURATE STUDY GUIDE
Income Statement - Answers - 1. Revenues
2. Expenses
3. Difference of that is Net income/loss
Balance Sheet - Answers - 1. Assets
2. Liabilities
3. Stockholders Equity
4. Assets Should Equal Liabilities & Stockholders Equity
Historic cost - Answers - An accounting principle that states that companies should
record assets at their costs.
Matching Principle - Answers - matches expenses with revenues in the period when the
company makes efforts to generate those revenues.
Example: A salesman earns a 5% commission on sales shipped and recorded in
January. The commission of $5,000 is paid in February. You should record the
commission expense in January.
Going Concern Assumption - Answers - The assumption that the company will continue
in operation for the foreseeable future.
Revenue Recognition Principle - Answers - An accounting principle under the GAAP
that determines the specific conditions under which income becomes realized as
revenue. Generally, revenue is recognized only when a specific critical event has
occurred and the amount of revenue is measurable.
Conservatism Principle - Answers - A branch of accounting that requires a high degree
of verification before making a legal claim to any profit. Accounting Conservatism will
recognize all probable losses as they are discovered and most expenditures as they are
incurred. Revenue will be deferred until it is verified.
Objectivity Principle - Answers - States that accounting information and financial
reporting should be independent and supported with unbiased evidence. This means
that accounting information must be based on research and facts, not a preparers
opinion. The Objectivity Principle is aimed at making financial statements more relevant
and reliable
Consistency - Answers - Use of the same accounting principles and methods from year
to year within a company
Business entity concept - Answers - Financial accounting is based on the premise that
the transactions and balances of a business entity are to be accounted for separately
from its owners. The business entity is therefore considered to be distinct from its
, owners for the purpose of accounting. Therefore, any personal expenses incurred by
owners of a business will not appear in the income statement of the entity.
Cash Method of Accounting - Answers - Is the more commonly used method of
accounting in small business. Income is not counted until cash ( or a check ) is actually
received, and expenses are not counted until they are actually paid.
Accrual Method of Accounting - Answers - Transactions are counted when the order is
made, the item is delivered, or the services occur, regardless of when the money us
actually received or paid. In other words, income is counted when the sale occurs, and
expenses are counted when you receive the goods or services. You don't have to wait
until you see the money, or actually pay money out of your checking account to record a
transaction.
GAAP - Answers - Generally Accepted Accounting Principles.
The common set of accounting principles, standards, and procedures that companies
use to compile their financial statements. Companies that use GAAP must maintain
their accounting records by using the Accrual basis of Accounting.
FASB - Answers - Financial Accounting Standards Board.
A 7 Member independent board consisting of accounting professionals who establish
and communicate standards of financial accounting and reporting in the United States.
FASB standards, known as GAAP, govern the preparation of corporate financial reports
and are recognized as authoritative by the SEC.
SOX - Answers - Sarbanes- Oxley Act of 2002.
Regulations passed by congress to reduce unethical corporate behavior.
PCAOB - Answers - Public Company Accounting Oversight Board.
The group charged with determining auditing standards and reviewing the performance
of auditing firms.
IASB - Answers - International Accounting Standards Board.
An accounting standard setting body that issues standards adopted by many countries
outside of the U.S.
IFRS - Answers - International Financial Reporting Standards.
Accounting Standards, issued by the IASB. Goal is to achieve a world wide set of
accounting standards.
Debits - Answers - Left side (What You Have)
Dividends
Expenses
Assets (Decrease in Assets is a credit)
Losses
Income Statement - Answers - 1. Revenues
2. Expenses
3. Difference of that is Net income/loss
Balance Sheet - Answers - 1. Assets
2. Liabilities
3. Stockholders Equity
4. Assets Should Equal Liabilities & Stockholders Equity
Historic cost - Answers - An accounting principle that states that companies should
record assets at their costs.
Matching Principle - Answers - matches expenses with revenues in the period when the
company makes efforts to generate those revenues.
Example: A salesman earns a 5% commission on sales shipped and recorded in
January. The commission of $5,000 is paid in February. You should record the
commission expense in January.
Going Concern Assumption - Answers - The assumption that the company will continue
in operation for the foreseeable future.
Revenue Recognition Principle - Answers - An accounting principle under the GAAP
that determines the specific conditions under which income becomes realized as
revenue. Generally, revenue is recognized only when a specific critical event has
occurred and the amount of revenue is measurable.
Conservatism Principle - Answers - A branch of accounting that requires a high degree
of verification before making a legal claim to any profit. Accounting Conservatism will
recognize all probable losses as they are discovered and most expenditures as they are
incurred. Revenue will be deferred until it is verified.
Objectivity Principle - Answers - States that accounting information and financial
reporting should be independent and supported with unbiased evidence. This means
that accounting information must be based on research and facts, not a preparers
opinion. The Objectivity Principle is aimed at making financial statements more relevant
and reliable
Consistency - Answers - Use of the same accounting principles and methods from year
to year within a company
Business entity concept - Answers - Financial accounting is based on the premise that
the transactions and balances of a business entity are to be accounted for separately
from its owners. The business entity is therefore considered to be distinct from its
, owners for the purpose of accounting. Therefore, any personal expenses incurred by
owners of a business will not appear in the income statement of the entity.
Cash Method of Accounting - Answers - Is the more commonly used method of
accounting in small business. Income is not counted until cash ( or a check ) is actually
received, and expenses are not counted until they are actually paid.
Accrual Method of Accounting - Answers - Transactions are counted when the order is
made, the item is delivered, or the services occur, regardless of when the money us
actually received or paid. In other words, income is counted when the sale occurs, and
expenses are counted when you receive the goods or services. You don't have to wait
until you see the money, or actually pay money out of your checking account to record a
transaction.
GAAP - Answers - Generally Accepted Accounting Principles.
The common set of accounting principles, standards, and procedures that companies
use to compile their financial statements. Companies that use GAAP must maintain
their accounting records by using the Accrual basis of Accounting.
FASB - Answers - Financial Accounting Standards Board.
A 7 Member independent board consisting of accounting professionals who establish
and communicate standards of financial accounting and reporting in the United States.
FASB standards, known as GAAP, govern the preparation of corporate financial reports
and are recognized as authoritative by the SEC.
SOX - Answers - Sarbanes- Oxley Act of 2002.
Regulations passed by congress to reduce unethical corporate behavior.
PCAOB - Answers - Public Company Accounting Oversight Board.
The group charged with determining auditing standards and reviewing the performance
of auditing firms.
IASB - Answers - International Accounting Standards Board.
An accounting standard setting body that issues standards adopted by many countries
outside of the U.S.
IFRS - Answers - International Financial Reporting Standards.
Accounting Standards, issued by the IASB. Goal is to achieve a world wide set of
accounting standards.
Debits - Answers - Left side (What You Have)
Dividends
Expenses
Assets (Decrease in Assets is a credit)
Losses
