Major Field Test Business Study Set - Questions
With Tailored Solutions
Income Statement Correct Answer - Presents the results of the
operations of an entity over a period of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Balance Sheet Correct Answer - Attempts to describe the
financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains
after deducting liabilities from assets..
Statement of Equity or Statement of Retained Earnings (Capital)
Correct Answer - Bridges the gap between the income statement
and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to
owners
Statement of Cash Flows Correct Answer - Provides
information about a company's cash receipts and cash payments
during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities,
equity, net income, income, gains, losses, Statement of 'X' Equity,
Investments by Owners, Distributions to Owners.
,Cash Basis Accounting Correct Answer - Revenue is recognized
in the accounting period in which the associated cash is received
and Expenses are recognized in the accounting period that the cash
is paid.
Accrual Basis Accounting Correct Answer - Revenue is
recognized in the accounting period in which the revenue is earned,
regardless of when the associated revenue is received. (Recorded
when the sale is made, not when it is paid for.)
Depreciation Correct Answer - A method of allocating the cost
of a tangible asset over its useful life. Businesses depreciate long-
term assets for both tax and accounting purposes.
Straight-Line Deprecation Correct Answer - Straight Line
Depreciation - (estimated value/useful life)
Equal amounts of depreciation expense are recorded in each period
of the useful life of the asset, if not disposed of prior to the end of
estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation Correct Answer -
Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in
the early periods of useful life and less in the later periods.)
Basic Inventory Equation for Goods Correct Answer -
Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) Correct
Answer - Goods Available for Sale - Ending Inventory = Cost of
Goods Sold (COGS)
, Basic Inventory Equation for Ending Inventory Correct Answer -
Beginning Inventory + Purchases = Goods Available for Sale - Cost of
Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting Correct Answer - No
transactions are recorded in the inventory account until the end of
the accounting period. Merchandise purchases are recorded in a
purchases account.
Inventory is counted and costed at the end of each accounting
period. The inventory account beginning balance is adjusted to
physical inventory amount and the difference is added to or
subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting Correct Answer - Merchandise
purchases are added to the inventory account when the
merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory
account as sales are recorded.
FIFO (Inventory) Correct Answer - Inventory Oldest items
inventory are sold first .(Example: Fruit)
LIFO (Inventory) Correct Answer - Most recent items added to
inventory are sold first. (Example: Ore from Mining)
Average Cost (Inventory) Correct Answer - Ending inventory
units are costed using an average cost of goods available divided by
the units available for sale. (Example: Rope)
Specific Identification (Inventory) Correct Answer - Inventory
items are tagged with their cost. (Example: automobiles)
With Tailored Solutions
Income Statement Correct Answer - Presents the results of the
operations of an entity over a period of time.
Includes: Revenues, Expenses, Income, Gains & Losses
Balance Sheet Correct Answer - Attempts to describe the
financial condition of the firm at a point in time.
Includes: Assets, Liabilities, & Equity - "net assets" what remains
after deducting liabilities from assets..
Statement of Equity or Statement of Retained Earnings (Capital)
Correct Answer - Bridges the gap between the income statement
and the balance sheet.
Arrangement depends on type of organization:
Proprietorship: Statement of Owners Equity
Partnership: Statement of Partners Equity
Corporation: Statement of Stockholders Equity
In addition, it contains: Investments by Owners and Distribution to
owners
Statement of Cash Flows Correct Answer - Provides
information about a company's cash receipts and cash payments
during a specific period of time.
Includes all 10 elements of financial statements: assets, liabilities,
equity, net income, income, gains, losses, Statement of 'X' Equity,
Investments by Owners, Distributions to Owners.
,Cash Basis Accounting Correct Answer - Revenue is recognized
in the accounting period in which the associated cash is received
and Expenses are recognized in the accounting period that the cash
is paid.
Accrual Basis Accounting Correct Answer - Revenue is
recognized in the accounting period in which the revenue is earned,
regardless of when the associated revenue is received. (Recorded
when the sale is made, not when it is paid for.)
Depreciation Correct Answer - A method of allocating the cost
of a tangible asset over its useful life. Businesses depreciate long-
term assets for both tax and accounting purposes.
Straight-Line Deprecation Correct Answer - Straight Line
Depreciation - (estimated value/useful life)
Equal amounts of depreciation expense are recorded in each period
of the useful life of the asset, if not disposed of prior to the end of
estimated useful life.
The value is divided among estimated life of item.
Double Declining Balance Depreciation Correct Answer -
Double Declining Balance
An "accelerated" depreciation method (more expense is recorded in
the early periods of useful life and less in the later periods.)
Basic Inventory Equation for Goods Correct Answer -
Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS) Correct
Answer - Goods Available for Sale - Ending Inventory = Cost of
Goods Sold (COGS)
, Basic Inventory Equation for Ending Inventory Correct Answer -
Beginning Inventory + Purchases = Goods Available for Sale - Cost of
Goods Sold (COGS) = ending inventory
Periodic Inventory Accounting Correct Answer - No
transactions are recorded in the inventory account until the end of
the accounting period. Merchandise purchases are recorded in a
purchases account.
Inventory is counted and costed at the end of each accounting
period. The inventory account beginning balance is adjusted to
physical inventory amount and the difference is added to or
subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting Correct Answer - Merchandise
purchases are added to the inventory account when the
merchandise is received.
Cost of Goods Sold is computed and subtracted from the inventory
account as sales are recorded.
FIFO (Inventory) Correct Answer - Inventory Oldest items
inventory are sold first .(Example: Fruit)
LIFO (Inventory) Correct Answer - Most recent items added to
inventory are sold first. (Example: Ore from Mining)
Average Cost (Inventory) Correct Answer - Ending inventory
units are costed using an average cost of goods available divided by
the units available for sale. (Example: Rope)
Specific Identification (Inventory) Correct Answer - Inventory
items are tagged with their cost. (Example: automobiles)
