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ACG 5026 FSU Practice Exam Questions and Correct Answers
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Three general uses of accounting 1. Financial reporting and external performance evaluations 2. Managerial decision making 3. Managerial planning, control & internal performance evaluations Economic role of financial reporting * Investors and creditors need numbers to monitor compensation contract...

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  • August 12, 2024
  • 7
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • acg 5026 fsu practice exam questions and correct a
  • three general uses of accounting 1 financial rep
  • economic role of financial reporting investors

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  • ACG 5026

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ACG 5026 FSU Practice Exam Questions
and Correct Answers
Three general uses of accounting ✅1. Financial reporting and external performance
evaluations
2. Managerial decision making
3. Managerial planning, control & internal performance evaluations

Economic role of financial reporting ✅* Investors and creditors need numbers to
monitor compensation contracts with managements
* Need financial information to decide where to invest funds
* Companies hire auditors to attract investors so managers attempt to keep up levels of
compensation

Nature and importance of corporate governance ✅is honest to shareholders and acts
in their best interest

How accounting standards are set ✅International Accounting Standards Board (IASB)
created International Financial Reporting Standards (IFRS)

What does a "clean" audit indicate ✅that the auditors believe the financial statements
present fairly the economic conditions of the firm in accordance with GAAP

Advantages of corporate entity form ✅limits liability, separates tax liabilities, does not
die when owners do

Disadvantages of corporate entity firm ✅Costs of running it, double taxations, more
documentations than other business entities

What are the four financial statements ✅Balance sheet, income statement, statement
of stockholders equity, statement of cash flows

Balance sheet ✅snapshot in time, lists company's investments and sources of
financing using (A=L+SE)

An asset must _______. ✅be expected to bring economic benefit

How do you find ending stockholder's equity? ✅Beginning SE + stock -Dividends =
end SE

Income statement ✅Reports the results of operation (operating, financing, investing)
over a period of time (usually a year)

, Net income = ✅Revenues - Expenses!

Statement of Stockholders Equity ✅Indicates changes in owner financing

Statement of Cash Flows ✅indicates sources and uses of cash

How are financial statements interrelated ✅* Bottom line of income statement is net
income - this links to balance sheet and statement of cash flows
* On balance sheet, net income goes to stockholders equity via retained earnings
* RE is equal to the previous period's retained earnings plus NI less dividends from
period
* on cash flows, net income is the first line and used to calculate cash flows from
operations.
*Any non-cash expense or income from income statement flow into the cash flow
statement and adjust net income to arrive at cash flow from operations
* Any balance sheet items that have cash impact are linked to statement of cash flows
as either source or use of cash
* Net change in cash on the cash flow statement and cash from the previous balance
sheet comprise cash for this period

What are the three basic business activities ✅1. Operating Profit: Balance Sheet
2. Cash Flow: Statement of Cash Flows
3. Owner's Equity: Statement of Cash Flows

4 basic functions of financial accounting ✅1. Economic entity
2. Fiscal period
3. Going concern
4. Stable Dollar

Economic Entity ✅A company is assumed to be a separate economic entity that can
be identified and measured

Fiscal Period ✅The life of an economic entity can be broken down into periods (usually
one year)

Going concern ✅We assume that the life of a corporation/economic entity is indefinite

Stable dollar ✅We assume that the value of the dollar is stable for company evaluation
purpose

4 principles of accounting ✅1. Objectivity
2. Revenue Recognition
3. Consistency
4. Materiality

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