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Major Field Test Business Study Set Questions and Correct Answers the Latest Update
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Major Field Test Business Study Set
Questions and Correct Answers the
Latest Update
Balance Sheet
✓ Attempts to describe the financial condition of the firm at a point in time.
✓ Includes: Assets, Liabilities, & Equity - "net assets" what remains after deducting
liabilities from assets..
Income Statement
✓ Presents the results of the operations of an entity over a peroid of time.
✓ Includes: Revenues, Expenses, Income, Gains & Losses
Statement of Equity or Statement of Retained Earnings (Capital)
✓ Bridges the gap between the income statement and the balance sheet.
✓
✓ Arrangement depends on type of organization:
✓ Proprietorship: Statement of Owners Equity
✓ Partnership: Statement of Partners Equity
✓ Corporation: Statement of Stockholders Equity
✓
✓ In addition, it contains: Investments by Owners and Distribution to owners
Statement of Cash Flows
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✓ Provides information about a company's cash receipts and cash payments during a
specific period of time.
✓
✓ Includes all 10 elements of financial statements: assets, liabilities, equity, net income,
income, gains, losses, Statement of 'X' Equity, Investments by Owners, Distributions
to Owners.
Cash Basis Accounting
✓ Revenue is recognized in the accounting period in which the associated cash is
received and Expenses are recognized in the accounting period that the cash is paid.
Accrual Basis Accounting
✓ Revenue is recognized in the accounting period in which the revenue is earned,
regardless of when the associated revenue is received. (Recorded when the sale is
made, not when it is paid for.)
Depreciation
✓ A method of allocating the cost of a tangible asset over its useful life. Businesses
depreciate long-term assets for both tax and accounting purposes.
Straight-Line Deprecation
✓ Straight Line Depreciation - (estimated value/useful life)
✓ Equal amounts of depreciation expense are recorded in each period of the useful life
of the asset, if not disposed of prior to the end of estimated useful life.
✓ The value is divided among estimated life of item.
Double Declining Balance Depreciation
✓ Double Declining Balance
✓ An "accelerated" depreciation method (more expense is recorded in the early
periods of useful life and less in the later periods.)
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Basic Inventory Equation for Goods
✓ Beginning Inventory + Purchases = Goods
Basic Inventory Equation for Cost of Goods Sold (COGS)
✓ Goods Available for Sale - Ending Inventory = Cost of Goods Sold (COGS)
Basic Inventory Equation for Ending Inventory
✓ Beginning Inventory + Purchases = Goods Available for Sale - Cost of Goods Sold
(COGS) = ending inventory
Periodic Inventory Accounting
✓ No transactions are recorded in the inventory account until the end of the
accounting period. Merchandise purchases are recorded in a purchases account.
✓
✓ Inventory is counted and costed at the end of each accounting period. The inventory
account beginning balance is adjusted to physical inventory amount and the
difference is added to or subtracted from periodic Cost of Goods Sold.
Perpetual Inventory Accounting
✓ Merchandise purchases are added to the inventory account when the merchandise is
received.
✓
✓ Cost of Goods Sold is computed and subtracted from the inventory account as sales
are recorded.
FIFO (Inventory)
✓ Inventory Oldest items inventory are sold first .(Example: Fruit)
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LIFO (Inventory)
✓ Most recent items added to inventory are sold first. (Example: Ore from Mining)
Average Cost (Inventory)
✓ Ending inventory units are costed using an average cost of goods available divided by
the units available for sale. (Example: Rope)
Specific Identification (Inventory)
✓ Inventory items are tagged with their cost. (Example: automobiles)
Generally Accepted Accounting Principles (GAAP)
✓ A framework of accounting standards, rules and procedures defined by the
professional accounting industry, which has been adopted by nearly all publicly
traded U.S. companies.
Securities Act of 1935
✓ Established the SEC Securities and Exchange Commission with the explicit authority
to establish the rules, standards, and procedures used to account for transactions
and events. Also to establish the form and content of published financial reporting.
Management Accounting
✓ Concerned with identification, measurement, accumulation, analysis, preparation,
interpretation, and communication of financial information used my management to
plan and evaluate and control within an organization to assure appropriate use of and
accountability of resources.
Cost Accounting
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