MGT 8803 - Financial
Accounting Comprehensive
Questions with Verified
Answers Graded A+
Proprietorship - Answer: A form of business organization with one owner who takes all the risks
and all the profits. Unlimited liability, but the business doesn't pay taxes.
Partnership - Answer: A business owned by two or more people who share its risks and rewards.
Unlimited liability, but the business doesn't pay taxes.
Corporation - Answer: A business owned by stockholders who share in its profits but are not
personally responsible for its debts. Double taxation.
Going Concern Assumption - Answer: The assumption that the company will continue in
operation for the foreseeable future.
Periodicity Assumption - Answer: An assumption that the life of a business can be divided into
artificial time periods and that useful reports covering those periods can be prepared for the
business.
Materiality Assumption - Answer: The only information that needs to be disclosed in financial
statements is that which will be useful for those who use the financial statements to make
decisions.
, GAAP - Answer: Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
SEC - Answer: Securities and Exchange Commission
FASB - Answer: Financial Accounting Standards Board, is the private sector body given the
primary responsibility to work out the detailed rules that become GAAP.
IFRS - Answer: International Financial Reporting Standards. Opposition from US companies to
convert to this.
GAAP vs. Tax Accounting - Answer: Tax accounting focuses on IRS reporting.
Qualities of Financial Statements - Answer: Understandability, timeliness, full disclosure,
comparability (over time and with other companies), objectivity (accuracy not applicable
because judgement needed), decision relevance.
Three Required Financial Statements - Answer: 1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
Balance Sheet - Answer: Measures financial position at a point in time. Includes assets,
liabilities, and owner's equity - what company has and what it owes.
Liabilities - Answer: The creditor's claims to the assets of the business
Assets - Answer: Resources or rights to receive resources.
Accounting Comprehensive
Questions with Verified
Answers Graded A+
Proprietorship - Answer: A form of business organization with one owner who takes all the risks
and all the profits. Unlimited liability, but the business doesn't pay taxes.
Partnership - Answer: A business owned by two or more people who share its risks and rewards.
Unlimited liability, but the business doesn't pay taxes.
Corporation - Answer: A business owned by stockholders who share in its profits but are not
personally responsible for its debts. Double taxation.
Going Concern Assumption - Answer: The assumption that the company will continue in
operation for the foreseeable future.
Periodicity Assumption - Answer: An assumption that the life of a business can be divided into
artificial time periods and that useful reports covering those periods can be prepared for the
business.
Materiality Assumption - Answer: The only information that needs to be disclosed in financial
statements is that which will be useful for those who use the financial statements to make
decisions.
, GAAP - Answer: Generally Accepted Accounting Principles. The standards and rules that
accountants follow while recording and reporting financial activities.
SEC - Answer: Securities and Exchange Commission
FASB - Answer: Financial Accounting Standards Board, is the private sector body given the
primary responsibility to work out the detailed rules that become GAAP.
IFRS - Answer: International Financial Reporting Standards. Opposition from US companies to
convert to this.
GAAP vs. Tax Accounting - Answer: Tax accounting focuses on IRS reporting.
Qualities of Financial Statements - Answer: Understandability, timeliness, full disclosure,
comparability (over time and with other companies), objectivity (accuracy not applicable
because judgement needed), decision relevance.
Three Required Financial Statements - Answer: 1. Balance Sheet
2. Income Statement
3. Statement of Cash Flows
Balance Sheet - Answer: Measures financial position at a point in time. Includes assets,
liabilities, and owner's equity - what company has and what it owes.
Liabilities - Answer: The creditor's claims to the assets of the business
Assets - Answer: Resources or rights to receive resources.
