Financial Accounting Exam Questions And Correct Answers
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Course
Financial Accounting
Institution
Financial Accounting
Financial Accounting Exam Questions And
Correct Answers
Accounting - answerSystem that collects and processes (analyzes, measures, and records)
financial information about an organization and reports that information to decision makers.
Accounting entity - answerIs the organization for with fin...
Financial Accounting Exam Questions And
Correct Answers
Accounting - answer✔✔System that collects and processes (analyzes, measures, and records)
financial information about an organization and reports that information to decision makers.
Accounting entity - answer✔✔Is the organization for with financial data are to be collected.
The four basic statements: - answer✔✔1. Balance Sheet
2. Income Statement
3. Statement of Retained Earnings
4. Statement of Cash flows
Balance Sheet - answer✔✔Reports the amount of assets, liabilities and stockholders' equity of an
accounting entry at a point in time.
Income Statement - answer✔✔Reports the revenues less the expenses of the accounting period.
Statement of Retained Earnings - answer✔✔Reports the way that net income and the distribution
of dividends affected the financial position of the company during the accounting period.
Statement of Cash Flows - answer✔✔Reports inflows and outflows of cash during the
accounting period in the categories of operating, investing, and financing.
Assets - answer✔✔Are the economic resources owned by the company. Each of these economic
resources is expected to provide future benefits to the firm.
Liabilities - answer✔✔Are the company's debts or obligations. Which will be paid with assets or
services.
Stockholders' Equity (Owners' Equity) - answer✔✔Indicates the amount of financing provided
by owners of the business and earnings. Is the sum of the contribute capital + the retained
earnings.
Accounting Period - answer✔✔Is the time period cover by the financial statements.
Elements of the Income Statement - answer✔✔Revenues, Expenses and Net Income.
Revenues - answer✔✔Earnings from the sale of goods or services to costumers. Revenues are
reported whether or not have yet been paid for.
Expenses - answer✔✔Represent the dollar amount of resources the entity used to earn revenue
during the period.
Net Income ("the bottom line") - answer✔✔Is the excess of total revenues over total expenses.
Net Loss - answer✔✔If total expenses exceed total revenues.
Retained Earning Equation - answer✔✔Ending Retained Earnings = (Beginning of Retained
Earnings + Net Income) - Dividends
The Cash Flow Statement Equation - answer✔✔+/- Cash flow from Operating Activities (CFO)
+/- Cash flow from Investing Activities (CFI)
+/- Cash flow from Financing Activities (CFF)
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Change in Cash
Cash Flow from Operating Activities, and examples - answer✔✔CFO- Are cash flow that are
directly related to earning income. Example, collecting cash from costumers, pay salaries, pay
bills, pay to suppliers.
Cash Flow from Investing Activities, and examples - answer✔✔CFI- Are cash flow related to
the acquisition or sale of the company's productive assets. Example, the purchase of additional
equipment.
Cash Flow from Financing Activities, and examples - answer✔✔CFF- Are cash flow directly
related to the financing of the enterprise itself. Example, the payment of money to investors and
creditors.
Notes - answer✔✔"Footnotes" provide supplemental information about the financial condition
of a company.
GAAP - answer✔✔Generally Accepted Accounting Principles, are the measurement rules used
to develop the information in financial statements.
SEC - answer✔✔Security and Exchange Commission, is the U.S government agency that
determines the financial statements that public companies must provide to stockholders, and the
rules that they must use in producing those statements.
FASB - answer✔✔Financial Accounting Standards Board, is the private sector body given the
primary responsibility to work out the detailed rules that become GAAP.
Audit - answer✔✔Is an examination of the financial reports to ensure that they represent claim
and comfort with GAAP.
Primary objective of external financial reporting - answer✔✔Is to provide useful economic
information to help external parties make financial decisions.
Qualitative Characteristics of Financial Information - answer✔✔Information should be Relevant
and Reliable.
Separate-Entity Assumption - answer✔✔States that a business transactions are accounted for
separately from the transactions of owners.
Unit-Measure Assumption - answer✔✔States that accounting information should be measure
and reported in the national monetary unit.
Continuity Assumption - answer✔✔States that businesses are assumed to continue to operate
into the foreseeable future.
Cost Principle - answer✔✔Requires assets to be recorded at historical cost-cash paid plus the
current dollar value of all none cash considerations given on the date of the exchange.
Current Assets - answer✔✔Are assets that will be used or turned into cash within one year.
Current Liabilities - answer✔✔Are obligations that will be settle by providing cash, goods, or
services within the coming year.
Materiality - answer✔✔Exception suggest that small amounts that not likely to influence a user's
decision can be accounted for in the most beneficial manner.
Conservatism - answer✔✔Exception suggest that care should be taken not to over state assets
and revenues or understate liabilities and expenses.
Transaction - answer✔✔Is an exchange of assets or services to pay between a business and one
or more external parties to a business or a measurable internal event such as the use of assets in
operations.
Accounts - answer✔✔Is a standardized format that organizations use to accumulate the dollar
effect of transactions on each financial statement item. "Chart of account"
Transaction Analysis - answer✔✔Every transaction affects at least two accounts (dual effect),
and the accounting equation MUST remain in balance after each transaction.
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