Final: MISC Questions Flashcards
We record assets at cost, consistent with the BLANK principle
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GAAP stands for
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We don’t want to overstate earnings or overstate assets to be
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Per GAAP, revenue is recognized when EARNED (not when cash is received) because of
the __________________________ principle.
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Per GAAP, expenses are recognized when INCURRED (not when cash is paid because of
the _____________________ principle
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At the end of the year, we make what kind of journal entries to record revenues and
expenses in the proper time period?
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Which annual statement calculates the profitability of the firm?
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Which annual statement presents the financial position of the firm?
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Which annual statement reconciles the beginning of year cash balance to the end of the
year cash balance?
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Can a journal entry affect one account? Two accounts? Three or more accounts?
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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?
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Why does a firm record a closing journal entry?
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Why do we depreciate long-term assets?
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What is the allowance method and why do we use it?
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How does the direct write-off method differ from the allowance method?
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How does cash accounting differ from accrual?
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Why do we not amortize goodwill?
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Why do we create Unearned Revenue accounts?
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Why do we accrue expenses that we have not paid?
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What items are reported as “other” on the income statement?
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Which ratios measure firm profitability?
EPS, Gross Profit Percentage, Return on Sales
Which ratios measure a firm’s solvency?
debt to total assets ratio,Current Ratio
Which ratios measure a firm’s ability to collect its receivables?
Accounts Receivable Turnover, Average Collection Period
Which ratio measures a firm’s efficiency at using its assets to generate sales and profit?
Asset Turnover, Return on asset
Which statement is a “snap shot” of the firm’s financial position on a single day?
Balance Sheet -all others show the activity of the firm for a period of time
Which statement do you prepare first?
Income Statement- To get the net income
Which statement calculates the firm’s profitability for the year?
Income Statement
Do you prepare the adjusting journal entries before or after you prepare the firm’s
financial statements?
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
Do you prepare the closing entry before or after you prepare the firm’s financial
statements?
After
What type of accounts do you close?
Revenues-Expense-Dividends (You don’t close Assets, Liabilities, or SEquity because they carry over to next yr)
What is the accounting equation?
Assets = Liabilities + Stockholder Equity
What type of accounts are Debit Accounts? Credit Accounts?
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