M7, M8, F2 M1

Question 1

Accrual basis

Answer 1

in accordance with U.S. Gaap and matches revenues with expesnes. In order to properly mathc revenus with expenses in the periods in which they occur. It is sometime necessary to defer or accrue rev or expenses

Question 2

If reveneue is deferred you D Cash and Credit

Answer 2

Unearned revenue

Question 3

Prepaid expense over time your asset (prepaid expense goes down) but what goes up?

Answer 3

Expense

Question 4

An entity must assess whether revenues have been earned prior to the cash being received. If so, revenues must be accrued by recording a

Answer 4

Accounts receivable

Question 5

If expenses have been deferred the appropriate entry is what?

Answer 5

D Prepaid C Cash

Question 6

When an error correction is discovered in the current year it must be corrected in that financial by a changing estimate. True or False

Answer 6

False. An adjusting entry may be required in this case to ensure that the financial statements are in accordance with the accrual basis of accounting

Question 7

Expenses that have been incurred prior to the cash being paid by recording what entry?

Answer 7

D Expense, C Accrued Liability

Question 8

What are the rules for recording adjusting journal entries

Answer 8

Adjusting JEs must be recorded by the end of the entity’s fiscal year before the preparation of financial statements, the JEs NEVER involve the cash account, ALL adjusting entries will hit one income statement account and one balance sheet account

Question 9

True or False: Disclosures of accounting policies is an integral part of the financial statments

Answer 9

True

Question 10

The summary of significant account policies includes disclosure of the following:

Answer 10

Criteria for which investments are cash equivalents, Special revenue recognition issues (long term construction contract, franchising, leasing operations) basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, use of estimates, fiscal year definition

Question 11

The summary of significant account policies includes disclosure of the following:

Answer 11

Criteria for which investments are cash equivalents, Special revenue recognition issues (long term construction contract, franchising, leasing operations) basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, use of estimates, fiscal year definition. Other notes to include

Question 12

Some examples of other notes to include for financial statements

Answer 12

related party disclosure, discontinued segment, outside ordinary course of business

Question 13

Footnotes should include what description?

Answer 13

The entity’s major products or services and its principal markets, including the location of those markets. information about stockholder equity as well as any other information about significant asset or liability accounts

Question 14

Paying rent in advance is an example of what kind of expense?

Answer 14

Prepaid Expense

Question 15

State the reasons as to why concentrations due to vulnerability would need to be disclosed

Answer 15

concentration exists (a lot of focus on a particular customer, supplier, lender, grantor, contributor) , entity vulnerable, could cause the entity severe impact. so if you had like a lot of your money tied into just 1 investment.

Question 16

When recognizing revenue over time there are two methods you can use, what are the?

Answer 16

Input method and output method

Question 17

Define Input Method

Answer 17

The input method is the most common and is very similar to the
percentage of completion approach. The input method recognizes revenue based
on satisfying the performance obligation relative to the total performance
obligation to be performed, such as recognizing revenue on construction project as
costs are incurred relative to the total estimated cost to finish the project. The input method is used when the costs being tracked are things like costs
incurred, labor hours, machine hours, etc

Question 18

True or False: The Input Method is very similar to the percentage of completion approach

Answer 18

True The input method is the most common and is very similar to the
percentage of completion approach.

Question 19

Define Output Method

Answer 19

The output method recognizes revenue based on the value transferred to the
customer relative to the total value to be transferred. These are things such as
units produced or delivered, milestones reached, etc.

Question 20

What are examples of the output method

Answer 20

Units produced, milestones reached

Question 21

True or False; Advances affect accrual basis expense

Answer 21

False: advances affect cash flow but do not affect accrual basis expense. So for example if sales are given an advance of 15000 per month, the advance is expensed and is not part of your accrual calculation for commissions expense accrued for the month, quarter etc.

Question 22

A bookkeeping error that is discovered in the current year for the prior year it should be corrected in the opening balance of retained earnings because

Answer 22

If the current year is the ONLY year that is being presented (and there are no comparable years) then there are no prior period restatements for this error. The error would just be adjusted om the opening balance of retained earnings

Question 23

A change in the method of depreciation is now considered to be both a change in accounting method and a change in

Answer 23

Estimate. These changes should be accounted for as changes in estimate and handled prospectively. No retroactive or retrospective calculations should be made and no adjustments should be made to retained earnings.

Question 24

True or False: A change from LIFO to FIFO for inventory valuation costing is a change in accounting principle

Answer 24

True