Accounting Principles – 1 exam
questions with verified correct answers
What is the accounting Cycle? - answer Analyzing, recording, classifying, summarizing, and
reporting
External Users of accounting info: - answer Investors, Lenders, very strict regulation
Internal users of accounting info: - answer Management, not as strict
Balance Sheet - answer Reports financial information at a given moment in time. Mimics the
accounting equation. A=L+OE
Income Statement - answer Reports financial activity for a given time period
Statement of cash flows - answer Tells reviewer of info where the assets came from
What is a CPA? - answer Certified Public Accountant.
How do you become a CPA? - answer You must either have 150 hours in credit, or have a
masters in accounting.
Big 4 in accounting: - answer 1. PWC
2. Deloitte
3. Ernstons Young
4. KPMG
What is debit and credit? - answer Debit left, Credit Right
, Revenue vs. Equity - answer Revenue increase equity, expenses decrease equity
What does Ownsers Equity include? - answer Common stock, Paid in Capital (capital surplus),
Retained Earnings
Treasury stock is stock that a company buys back that negatively effects OE.
Gross Profit - answer Component of an income statement of a company that makes sales.
EPS - answer Net Income/Number of Shares Outstanding
Statement of Retained Earnings - answer Report that shows the changes in retained earnings
during a period of time.
What is responsible for the financial statements? - answer Management is responsible for the
financial statements
What is sampling? - answer When the auditor checks certain financial statements, or physically
inspects supposed assets.
Internal Control - answer Company should have a strong internal control. The stronger the
internal control, the easier it is to perform an audit.
Unqualified Opinion - answer Says that they have audited and are sure that financial statements
are accurate. They basically are giving their seal of approval that everything checks out.
Separate Entity - answer Businesses must have records that are separate from the records of the
owners.
questions with verified correct answers
What is the accounting Cycle? - answer Analyzing, recording, classifying, summarizing, and
reporting
External Users of accounting info: - answer Investors, Lenders, very strict regulation
Internal users of accounting info: - answer Management, not as strict
Balance Sheet - answer Reports financial information at a given moment in time. Mimics the
accounting equation. A=L+OE
Income Statement - answer Reports financial activity for a given time period
Statement of cash flows - answer Tells reviewer of info where the assets came from
What is a CPA? - answer Certified Public Accountant.
How do you become a CPA? - answer You must either have 150 hours in credit, or have a
masters in accounting.
Big 4 in accounting: - answer 1. PWC
2. Deloitte
3. Ernstons Young
4. KPMG
What is debit and credit? - answer Debit left, Credit Right
, Revenue vs. Equity - answer Revenue increase equity, expenses decrease equity
What does Ownsers Equity include? - answer Common stock, Paid in Capital (capital surplus),
Retained Earnings
Treasury stock is stock that a company buys back that negatively effects OE.
Gross Profit - answer Component of an income statement of a company that makes sales.
EPS - answer Net Income/Number of Shares Outstanding
Statement of Retained Earnings - answer Report that shows the changes in retained earnings
during a period of time.
What is responsible for the financial statements? - answer Management is responsible for the
financial statements
What is sampling? - answer When the auditor checks certain financial statements, or physically
inspects supposed assets.
Internal Control - answer Company should have a strong internal control. The stronger the
internal control, the easier it is to perform an audit.
Unqualified Opinion - answer Says that they have audited and are sure that financial statements
are accurate. They basically are giving their seal of approval that everything checks out.
Separate Entity - answer Businesses must have records that are separate from the records of the
owners.
