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HBX Financial Accounting Final exam(89 questions and answers)
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HBX Financial Accounting Final exam(89 questions and answers)
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HBX FinancialAccounting Final
exam(89
questions and
answers)
What is the purpose of accounting? - answer
Allows us to understand what's going on
within a business.
Accounting Equation - answer Assets =
Liabilities + Owners' Equity
Accrual method of accounting - answer
Transactions are recorded in the period to
which they relate, regardless of when cash is
exchanged.
,Conservatism - answer The requirement to
record EXPECTED expenses or loss when
they're probable, but only record
gains/revenue when they're realized.
(Prevents companies from making
themselves look overly favorable).
Materiality - answer Trivial matters don't
have to be recorded in financial statements
of the business. (trivial bc it won't impact
decision making of person using those
reports).
The entity concept - answer The idea that
personal financial activity is kept separate
from business financial activity
Money measurement Principle - answer Only
values that can be measured in monetary
terms should be recorded on financial
statements
Going concern - answer Assumption that a
business will keep operating as it has been in
, the future (ex. don't write of merchandise
that could be sold in the foreseeable future)
Relevance & reliability - answer Relevance
ensures information on financial statements
are relevant to user.
Reliability ensures info on financial
statements accurately reflect underlying
transactions (valid, verifiable, & unbiased)
Historical Cost - answer Transactions are
recorded at the actual price or cost that
existed at the time a transaction occurred.
Consistency Principle - answer Uses same
accounting methods over time.
Assets - answer Resources owned or
controlled by an entity that will produce
benefits in the future.
Liabilities - answer Obligations to pay a third
party for resources provided to an entity
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