Exam (elaborations)
Accounting Exam 1 Review Questions and Answers
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- Accounting
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- Accounting
Accounting Exam 1 Review Questions and Answers
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Accounting Exam 1 Review Questionsand Answers
How are bookkeeping and accounting different? - Answer-Bookkeeping is one part of
accounting involving the reporting and classifying of transactions; accounting combines
bookkeeping and summarizing and interpreting the financial statement
How does cash basis accounting differ from accrual basis accounting? - Answer-Cash
basis accounting recognizes an accounting transaction at point of cash inflow or outflow
rather than recognizing all revenues accounting to the accounting period in which they
are earned like accrual accounting
What is the difference between financial accounting and managerial accounting? -
Answer-Financial accounting deals with past transactions and provides information to
external users while managerial accounting deals with future transactions and helping
make managerial decisions and enhance controls
How would liabilities be defined in terms of the basic accounting equation? - Answer-
Liabilities are obligations to pay money or other assets or services to an outside party
What are the basic principles and assumptions of financial accounting? - Answer-
Assumptions: business entity, continuity of the business unit; unit of measurement;
objective evidences
Principles: cost principle, full disclosure principle, consistency principle, matching
principle, conservatism principle, and materiality principle
How do revenues and expenses affect the owners' equity account? - Answer-Revenues
increase the owners' equity account while expenses decrease it
Why are revenues and expenses recorded separately from owner's equity accounts? -
Answer-Revenue and expenses are recorded separately from the owners' equity
accounts so the accountant can readily obtain information on the various kinds of
revenues and expenses
What is the normal balance of each major class of accounts? - Answer-It is the type of
balance that an account usually shows; assets = debit; liabilities = credit; expenses =
debit; revenues = credit
What is the difference between a journal and a ledger? - Answer-A journal analyzes and
records all accounting transactions and a ledger is a record of a company's entire
financial transaction history on which the left side is for debits and the right side is for
credits. The key difference between the two is that a journal is the first step of the
accounting process and a ledger is an extension of that, the final book of accounts.
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