ACCS Review Exam with Accurate
Answers
Business Entity Principle - ✔✔Principle prescribing that every business to be accounted for
separately and distinctly from its owner or owners
Going Concern Principle - ✔✔Principle prescribing that financial statements reflect the
assumption that the business will continue operating instead of being closed or sold, unless
evidence shows that it will not continue
Revenue Recognition Principle - ✔✔Requires revenue to be recognized at the time that it is
earned. Allows the inflow of assets associated with revenue to be in a form other than cash.
Measures the amount of revenue as the cash plus the cash equivalent value of any non-cash
assets received from customers in exchange for goods and services
Matching Principle - ✔✔Broad principle that requires expenses to be reported in the same
period as the revenue that were earned as result of the expenses
Debt - ✔✔left hand side of T-account
Credit - ✔✔Decreases asset and expense accounts, and increase liability, common stock and
revenue accounts
Cash Basis Accounting - ✔✔System of preparing financial systems based on recognizing
revenues when the cash is received and reporting expenses when the cash is paid
Adjusting Entries - ✔✔Affects the cash account
Classified Balance Sheet - ✔✔Organizes assets and liabilities into important subgroups
, Calculating Cost Of Goods Sold
Company had sales of $375,000 and its gross profit was $157,500. - ✔✔$375,000-
$157,500=$217,500
(sales)-(gross profit)=(cost of goods sold)
Calculating Sales and Gross Profit
A company had expenses other than cost of goods sold of $250,000. Determine sales and gross
profit given cost of goods sold was $100,000 and net income was $150,000. -
✔✔$500,000=$100,000+$150,000+$250,000
(Sales)=(Cost of Goods Sold)+(Net Income Expenses)+(Other Expenses)
$400,000=$150,000+$250,000
(Gross Profit)=(Net Income)+(Expenses)
LIFO Method - ✔✔During a period of steadily rising costs, the inventory valuation method that
yields the lowest reported net income
Weighted Average - ✔✔Inventory valuation method that tends to smooth out erratic changes
Establish Responsibilities - ✔✔When two clerks share the same cash register it is a violation of
this internal control principle
Maintain adequate Records - ✔✔Pre-numbered printed checks, internal control principle
Unearned Revenues - ✔✔Liabilities created when a customer pays in advance for products
Contingency Principle - ✔✔Requires a company to consistency apply the same accounting
method of inventory valuation unless a change will improve financial reporting
Answers
Business Entity Principle - ✔✔Principle prescribing that every business to be accounted for
separately and distinctly from its owner or owners
Going Concern Principle - ✔✔Principle prescribing that financial statements reflect the
assumption that the business will continue operating instead of being closed or sold, unless
evidence shows that it will not continue
Revenue Recognition Principle - ✔✔Requires revenue to be recognized at the time that it is
earned. Allows the inflow of assets associated with revenue to be in a form other than cash.
Measures the amount of revenue as the cash plus the cash equivalent value of any non-cash
assets received from customers in exchange for goods and services
Matching Principle - ✔✔Broad principle that requires expenses to be reported in the same
period as the revenue that were earned as result of the expenses
Debt - ✔✔left hand side of T-account
Credit - ✔✔Decreases asset and expense accounts, and increase liability, common stock and
revenue accounts
Cash Basis Accounting - ✔✔System of preparing financial systems based on recognizing
revenues when the cash is received and reporting expenses when the cash is paid
Adjusting Entries - ✔✔Affects the cash account
Classified Balance Sheet - ✔✔Organizes assets and liabilities into important subgroups
, Calculating Cost Of Goods Sold
Company had sales of $375,000 and its gross profit was $157,500. - ✔✔$375,000-
$157,500=$217,500
(sales)-(gross profit)=(cost of goods sold)
Calculating Sales and Gross Profit
A company had expenses other than cost of goods sold of $250,000. Determine sales and gross
profit given cost of goods sold was $100,000 and net income was $150,000. -
✔✔$500,000=$100,000+$150,000+$250,000
(Sales)=(Cost of Goods Sold)+(Net Income Expenses)+(Other Expenses)
$400,000=$150,000+$250,000
(Gross Profit)=(Net Income)+(Expenses)
LIFO Method - ✔✔During a period of steadily rising costs, the inventory valuation method that
yields the lowest reported net income
Weighted Average - ✔✔Inventory valuation method that tends to smooth out erratic changes
Establish Responsibilities - ✔✔When two clerks share the same cash register it is a violation of
this internal control principle
Maintain adequate Records - ✔✔Pre-numbered printed checks, internal control principle
Unearned Revenues - ✔✔Liabilities created when a customer pays in advance for products
Contingency Principle - ✔✔Requires a company to consistency apply the same accounting
method of inventory valuation unless a change will improve financial reporting
