Financial Accounting Exam 1 Review Guide
Accounting Equation - answerAssets(things you own)=Liabilities(things you
owe)+Equity(stockholder's claim on assets)
Debt Ratio - answerTotal liabilities/total assets
Current Ratio - answerCurrent Assets/Current Liabilities
Gross-Margin Ratio - answer(N...
Accounting Equation - answer✔Assets(things you own)=Liabilities(things you
owe)+Equity(stockholder's claim on assets)
Debt Ratio - answer✔Total liabilities/total assets
Current Ratio - answer✔Current Assets/Current Liabilities
Gross-Margin Ratio - answer✔(Net Sales-Cost of Goods Sold)/Net Sales
International Accounting Standards Board (IASB) - answer✔Independent group consisting of
members from many countries, creates international financial reporting standards
Generally Accepted Accounting Principles(GAAP) - answer✔Made up of principles and
assumptions
Securities Exchange Commision - answer✔Created by government to regulate securities market
and protect investors
Principles - answer✔Put in place so everyone does things the same way
Revenue Recognition Principle - answer✔Recognize revenue when earned (service is
performed)
Matching Principal - answer✔Company must record its expenses incurred to generate the
revenue reported
Full Disclosure Principal - answer✔Company required to report details of financial statements
Going Concern Assumption - answer✔Business will continue running
Monetary Unit Assumption - answer✔Business is measured in monetary units
Time Period Assumption - answer✔Life of companies can be divided into time period
Business Entity Assumption - answer✔means that a business is accounted for separately from
other business entities, including its owner
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