Final: MISC Questions

Question 1

We record assets at cost, consistent with the BLANK principle

Answer 1

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Question 2

GAAP stands for

Answer 2

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Question 3

We don’t want to overstate earnings or overstate assets to be

Answer 3

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Question 4

Per GAAP, revenue is recognized when EARNED (not when cash is received) because of
the __________________________ principle.

Answer 4

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Question 5

Per GAAP, expenses are recognized when INCURRED (not when cash is paid because of
the _____________________ principle

Answer 5

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Question 6

At the end of the year, we make what kind of journal entries to record revenues and
expenses in the proper time period?

Answer 6

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Question 7

Which annual statement calculates the profitability of the firm?

Answer 7

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Question 8

Which annual statement presents the financial position of the firm?

Answer 8

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Question 9

Which annual statement reconciles the beginning of year cash balance to the end of the
year cash balance?

Answer 9

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Question 10

Can a journal entry affect one account? Two accounts? Three or more accounts?

Answer 10

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Question 11

If a firm knows that there is a high probability that they will lose a law suit (for which
they need to pay a large settlement) but they are unable to make a reasonable estimate as
to how much they will need to pay, can the firm record a journal entry?

Answer 11

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Question 12

Why does a firm record a closing journal entry?

Answer 12

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Question 13

Why do we depreciate long-term assets?

Answer 13

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Question 14

What is the allowance method and why do we use it?

Answer 14

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Question 15

How does the direct write-off method differ from the allowance method?

Answer 15

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Question 16

How does cash accounting differ from accrual?

Answer 16

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Question 17

Why do we not amortize goodwill?

Answer 17

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Question 18

Why do we create Unearned Revenue accounts?

Answer 18

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Question 19

Why do we accrue expenses that we have not paid?

Answer 19

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Question 20

What items are reported as “other” on the income statement?

Answer 20

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Question 21

Which ratios measure firm profitability?

Answer 21

EPS, Gross Profit Percentage, Return on Sales

Question 22

Which ratios measure a firm’s solvency?

Answer 22

debt to total assets ratio,Current Ratio

Question 23

Which ratios measure a firm’s ability to collect its receivables?

Answer 23

Accounts Receivable Turnover, Average Collection Period

Question 24

Which ratio measures a firm’s efficiency at using its assets to generate sales and profit?

Answer 24

Asset Turnover, Return on asset

Question 25

Which statement is a “snap shot” of the firm’s financial position on a single day?

Answer 25

Balance Sheet -all others show the activity of the firm for a period of time

Question 26

Which statement do you prepare first?

Answer 26

Income Statement- To get the net income

Question 27

Which statement calculates the firm’s profitability for the year?

Answer 27

Income Statement

Question 28

Do you prepare the adjusting journal entries before or after you prepare the firm’s
financial statements?

Answer 28

BEFORE–you need to adjust the expenses
(such as depreciation) & revenues (such as interest) so as to report the income & expense in the correct accounting period

Question 29

Do you prepare the closing entry before or after you prepare the firm’s financial
statements?

Answer 29

After

Question 30

What type of accounts do you close?

Answer 30

Revenues-Expense-Dividends (You don’t close Assets, Liabilities, or SEquity because they carry over to next yr)

Question 31

What is the accounting equation?

Answer 31

Assets = Liabilities + Stockholder Equity

Question 32

What type of accounts are Debit Accounts? Credit Accounts?

Answer 32

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