Key Points Primer

Question 1

Criteria (3)

Answer 1

• relevance
• objectivity
• feasibility

Question 2

Important concepts to the balance sheet (2)

Answer 2

• historic cost

- duality

Question 3

Accounting identity

Answer 3

Assets= liabilities + equity

Question 4

prepaid

Answer 4

paid for but not used or consumed

Question 5

accrued

Answer 5

used or consumed but not yet paid for

Question 6

relevance

Answer 6

meaningful and useful

Question 7

objectivity

Answer 7

objective and can be trusted

Question 8

feasibility

Answer 8

collected easily and economically

Question 9

Profit =

Answer 9

profit = revenue - expenses

Question 10

income statement formula

Answer 10

profit= revenue - expenses

Question 11

realization concept

Answer 11

the profit on an asset is reported in the income statement only when the asset is sold

Question 12

matching concept

Answer 12

revenues and expenses should be shown together in the same accounting period regardless of the actual timing of cashflows

Question 13

accruals concept

Answer 13

revenues and expenses reflect rights and obligations to make and receive cash

Question 14

conservatism concept

Answer 14

recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome

Question 15

expenses

Answer 15

resources that are used up in achieving the revenues

Question 16

expenditures

Answer 16

the acquisition of resources in order to help generate future revenues

Question 17

cash flow statement

Answer 17

explains the change in cash during a period

Question 18

major cash flows

Answer 18

cash flow from operations, investment and financing

Question 19

Cash flow from operations (CFO)

Answer 19

the difference between cash receipts from selling products and cash payments on operations