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
