Book keeping Practice Test with Correct Answers
The financial statements are - Answer-collection of docs required by law for shareholders - submitted either on annual or quarterly basis depending on size
There are different GAAP rules for each - Answer-country
There are no bad credit write...
Book keeping Practice Test
with Correct Answers
The financial statements are - Answer-collection of docs required by law for
shareholders - submitted either on annual or quarterly basis depending on size
There are different GAAP rules for each - Answer-country
There are no bad credit write offs - Answer-even if firm is insolvent the 7liquidators
request payment of debt
Three main inventory valuations - Answer-FIFO
LIFO
Average cost
Trial balance - Answer-totals of each of the T accounts. It tests whether the T accounts
balance - total debits=credits
Two variations of T accounts - Answer-1. sub ledger
2.day book
value added tax - Answer-charge aimed at consumers
VAT control account - Answer-A central account which collects all the accounting data
needed for the VAT Return
usually a liability
GAAP means that the accounts will be - Answer-understandable and reflect gain/losses
and show real profit or loss
they will be possible to compare results of one company to another
Generally Accepted Accounting Principles (GAAP) - Answer-a set of accounting
standards that is used in the preparation of financial statements
, when applied results in legally sufficient financial statements.
going concern - Answer-financial statements are prepared with the expectation that a
business will remain in operation indefinitely
-need to pay debts, collect payments from debtors
higher the inventory the higher - Answer-the cost to maintain it
-need bigger warehouse
-higher rent and staff costs
-tie up cash in inventory- harder to finance elsewhere.
inventory - Answer-contents of warehouse that is held for sale
usually split into raw material and finished goods
less liquid than receivables (could take months to turn inventory into cash depending on
the nature of business)
a company may choose to disclose more in order to - Answer-benefit shareholders
accounts have to be - Answer-true and fair
-GAAP govern this concept
accrual - Answer-recognition of an expense or a revenue that has been incurred or
earned but has not yet been recorded
accrual is a - Answer-liability - CREDIT
accruals basis - matching - Answer-must account for a transaction in the period we get
the benefit/loss from it.
eg reflect revenue in the month weagrred the sale not when we receive the money
allowance for bad debt/ irrecoverable debt - Answer-always a risk some customers may
be unable to pay its debts therefore firms often make an allowance for doubtful debt.
asset - Answer-a resource controlled by the entity as a result of past events, from which
future economic benefits is expected to flow
DEBIT
asset and liability - Answer-balance sheet
auditor - Answer-a person who formally reviews and verifies financial accounts and
agrees that they are true and fair and comply with GAAP.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Scholarsstudyguide. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.09. You're not tied to anything after your purchase.
