HBS Core – Accounting UPDATED ACTUAL Questions and CORRECT Answers

HBS Core – Accounting UPDATED
ACTUAL Questions and CORRECT
Answers
Fundamental Accounting Equation - CORRECT ANSWER✔✔- Assets = Liabilities +
Owner's Equity


Asset - Definition - CORRECT ANSWER✔✔- Resources owned by a business



Liabilities - CORRECT ANSWER✔✔- Obligations to pay a third party



Owner's Equity - CORRECT ANSWER✔✔- Contributions from the owners' of a business.
Assets - Liabilities


Differences between Liabilities and Owner's Equity - CORRECT ANSWER✔✔- Owners
have the ability to make decisions about how the business operates. Lenders/suppliers do not


What increases owner's equity? - CORRECT ANSWER✔✔- Profits



Matching Principle - CORRECT ANSWER✔✔- Expenses should be recognized in the same
period in which the related revenue is recognized rather than when the related cash is paid


Components of the Accrual Accounting Method (3) - CORRECT ANSWER✔✔- Realization
Principle. Matching Principle. Going Concern


Realization Principle - CORRECT ANSWER✔✔- Revenue can only be recognized when the
revenue is both earned and realized/realizable


Going Concern - CORRECT ANSWER✔✔- A company is considered to be a going concern
if the entity is expected to remain in operation and be able to satisfy all commitments and
obligations and realize the benefits and values of all assets for the indefinite future. If there is
evidence to the contrary, the business may no longer be considered a going concern

,If a business is labeled as a going concern, is that business healthy or unhealthy? Why? -
CORRECT ANSWER✔✔- Healthy. Going concern means its expected to remain in
operation and satisfy all commitments/obligations


Is deferred revenue an asset or liability? - CORRECT ANSWER✔✔- Liability



Deferred Revenue - Definition - CORRECT ANSWER✔✔- Liability that represents the
obligation to provide future goods/services


Conservatism - CORRECT ANSWER✔✔- For revenues and gains it means recording them
when they are reasonably certain but for expenses and losses it means recording them when
they are reasonably possible. For assets it means recording the lower valuation while for
liabilities it means recording the higher possible valuation.


Historical Cost Principle - CORRECT ANSWER✔✔- Transactions are recorded at the cost
that existed when the transaction occurred.


Valuating Assets under Historical Cost Principle - CORRECT ANSWER✔✔- Financial
value of assets is shown at historical cost, rather than current market value. Example - Land
appreciation


Entity Concept - CORRECT ANSWER✔✔- A business is a separately identifiable entity.
Therefore, accounts of a business should be completely separate from those of owners of the
business


Money Measurement Principle - CORRECT ANSWER✔✔- Only values that can be
measured in monetary terms should be recorded in financial accounting records. Intangible
assets will not be recorded


Is brand recognition/brand equity recorded as an asset on financial statements? - CORRECT
ANSWER✔✔- No - brand equity is an intangible asset



Categorize: Cash - CORRECT ANSWER✔✔- Asset

, Categorize: Accounts Receivable - CORRECT ANSWER✔✔- Asset



Categorize: Notes Receivable - CORRECT ANSWER✔✔- Asset



Categorize: Interest Receivable - CORRECT ANSWER✔✔- Asset



Categorize: Inventory - CORRECT ANSWER✔✔- Asset



Categorize: Investments - CORRECT ANSWER✔✔- Asset



Categorize: Fixed Assets - CORRECT ANSWER✔✔- Asset



Categorize: Property, Plant & Equipment - CORRECT ANSWER✔✔- Asset



Categorize: Prepaid Insurance - CORRECT ANSWER✔✔- Asset



Categorize: Prepaid Rent - CORRECT ANSWER✔✔- Asset



Categorize: Other Prepaid Expenses - CORRECT ANSWER✔✔- Asset



Categorize: Goodwill - CORRECT ANSWER✔✔- Asset



Categorize: Other Intangible Assets - CORRECT ANSWER✔✔- Asset



Categorize: Deferred Tax Asset - CORRECT ANSWER✔✔- Asset



Categorize: Accounts Payable - CORRECT ANSWER✔✔- Liability