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ACCT 6241 Financial and Managerial Accounting Exam Questions with Correct and Verified Answers Guaranteed Pass (Score A)-East Carolina University
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Define "accounting" A way of recording, analyzing and summarizing transactions of a business. What is the "language" of accounting? Double entry bookkeeping What is the idea of double entry? The idea is that each entry is written down twice - Debit and Credit What are the three main steps of accounting?
The managers themselves decide the accounting methods. What degree of accuracy in required in FA? The data must be fair and accurate. What degree of accuracy in required in MA? Approximate values are acceptable as long as they are sufficient for management decisions. What is the scope of accounting in FA? Activities of the ENTIRE organization What is the scope of accounting in MA? Whatever the manager decides - separate segments, areas of production, subdivisions, market areas What are the measures of accounting information in FA? Cost and monetary
What are the measures of accounting information in MA? Cost, in kind, labor What is the information base in FA? Information about actual facts What is the information base in MA? Both factual, standard and plans, as well as forecasts What is the frequency of information provided in FA? Quarterly, annually What is the frequency of information provided in MA? Reports can be produced hourly, daily, weekly, as needed. Early stage companies can use what kind of accounting? Managerial accounting
The initial price paid for the acquisition of assets is the one that is recorded in the accounts Define "The Revenue or Realization Principle" Revenue is realized at the moment when goods are sold or when services are rendered. Define "Accruals Concept" Requires that income and expense must be recognized in the accounting periods to which they relate rather than on cash basis. Define "Matching Principle" The revenues generated in an accounting period are identified with related expenses whenever they were incurred. Define "Periodicity Concept (Accounting period)" Accounts should be prepared after every period and not at the end of the life of the entity Define "Objectivity Principle"
Accounting information and financial reporting should be independent, verifiable and free from bias. This means accounting information must be based on facts and not a preparer's opinion. The objectivity principle is aimed at making financial statements more relevant and reliable. Define "Materiality Concept" Financial reports only need to include information that is material to their users. This means that immaterial information can be ignored. Define "Consistency Concept" Accounting policies are to be followed consistently from one period to another. The same methods (inventory valuation, depreciation, etc.) must be used from one period to the next. Define "Dual Aspect Principle" Every transactions affects two or more accounts. (For every decrease/increase in asset/liability there is a simultaneous increase/decrease in asset/liability. Thus, giving us the accounting equation: Assets = Liability + Equity) Define "Prudence"
List different types of current assets Inventories - raw materials, work in progress (WIP), finished goods, goods for resale Cash-in-hand Cash in Bank Short-term financial investments Accounts Receivable List different types of capital Share Capital Retained Earnings List different types of liabilities Bank loans and credits Borrowings Account Payable List different types of expenses Cost of sales GAA expenses (general and administrative) Financial expenses
What are the four main types of financial statements? Balance sheet Income statement Retained earnings statement Statement of cash flow Explain "balance sheet" and its period of use To present a picture of what the business owns and what it owes - "snapshot" On a particular date Explain "income statement" and its period of use To show how successfully the business performed during a period by reporting revenues and expenses For the period Explain "retained earnings statement" and its period of use To show how much of previous income was distributed to owners in dividends, and how much is retained for future growth For the period
Less than 12 months A non-current asset is defined by what time period More than 12 months Define "Accounts Payable" Money owed by a business to its suppliers (business is going to give money away) Define "Accounts Receivable" Money owed by customers to a business (business is waiting to get money) How would you enter DIVIDENDS into a general journal? DR Retained Earnings CR Dividend Money-Management Concept A balance sheet does not report all the facts about a business. This concept limits that amount or type of information that can be reported.
Current Assets Cash and other assets that are expected to be converted into cash or used up in the near future, usually within one year. Securities Stocks and Bonds, they give valuable rights to the entity that owns them Marketable Securities Securities that are expected to be converted into cash within a year. Cash and cash equivalents Investments in safe, very short-term funds, such as money market funds Account Receivable an amount that is owed to the business, usually by one of its customers, as a result of the ordinary extension of credit. (i.e., customer electric bill) Inventories
A portion of the cost of this asset has been subtracted from its original cost because it has been used up. Investments Considered a noncurrent, intangible asset. E.g., securities, such as bonds. Patents and Trademarks Considered a noncurrent, intangible asset. Goodwill When a company buys another company and pays more than the value of its identifiable assets. Current Liabilities Claims that are due within a short time, usually within one year. Accounts Payable A current liability. Amounts that the company owes to its suppliers.
Bank Loan Payable Reported separately from accounts payable because debt is evidenced by promissory note. Accrued Liabilities Amounts owed to employees and others for services they have provided but for which they have not paid. Estimated Tax Liabilities The amount owed to the government for taxes. It is a current liability because the amount is due within one year. Current Portion A portion of a liability that is paid within one year, the other portion made me paid at a later date. Therefore, will show up separately as long-term debt. Liability can have current portion, but not a single asset. Equity Capital obtained from sources that are not liabilities. Paid-In Capital and Retained Earnings.
Revenues and expenses are changes in what account? Equity Net income is measured as the difference between revenues and expenses What does net income measure? The increase in equity during an accounting period that was associated with earnings activities. Cash Accounting Keeping track only of cash receipts and cash payments What does cash accounting NOT measure? equity Accrual accounting
Accounting for revenues and expenses, as well as for cash receipts and cash payments What does accrual accounting NOT measure? net income and changes in equity To measure the net income of a period you must measure what two accounts? Revenue and expenses for that period Conservatism Concept When a sale is uncertain and revenue cannot be recognized until delivery of goods or service occurs. To be conservative, decreases in equity should recognized as soon as they probably occur What are two parts of the conservatism concept?
