Financial Accounting Final Exam Questions With Answers
Separate Entity Assumption - Answer the financial reports of a business are assumed to include the results of only the business's activities
Cost - Answer the amount of resources that a company sacrifices to obtain goods or services; often said to be incurred when the company pays cash or uses credit to acquire the item
Revenue Recognition Principle - Answer revenues are reported when goods or services are delivered, there is evidence of an arrangement for customer payment, the price is fixed or determinable, and collection is reasonably assured
Expense Recognition Principle - Answer expenses are recorded when incurred in earning revenue; also called "matching"
Accrual Basis Accounting - Answer records revenues when they are earned and expenses in the same period as the revenues to which they relate, regardless of the timing of cash receipts or payments
Adjusting Journal Entries - Answer entries necessary at the end of each accounting period to measure all revenues and expenses of that period
Contra Account - Answer an account that is an offset to, or reduction of, another account
Carrying Value - Answer the amount at which an asset or liability is reported ("carried") in the financial statements; also known as "net book value" or "book value"
Dividends - Answer the distribution of a company's earnings to its stockholders' as a return on their investment; not an expense!
Permanent Accounts - Answer accounts that track financial results from year to year by carrying their ending balances into the next year
Temporary Accounts - Answer accounts that track financial results for a limited period of time by having their balances zeroed out at the end of each accounting year
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