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ACCT 200 assumptions
Identify the accounting assumption, principle or constraint
Question | Answer |
---|---|
What is the rationale for why plant assets are not reported at liquidation value | The Going Concern Assumption |
Indicates that personal and business record-keeping should be separately maintained | Economic entity assumption |
Ensures that all relevant information is reported | Full Disclosure Principle |
Assumes that the dollar is the "measuring stick" used to report on financial performance. | Monetary unit assumption |
Requires that accounting standards be followed for all items of significant size. | Materiality |
Requires recognition of expenses in the same period as related revenues | Expense recognition principle |
Indicates that fair value changes subsequent to purchase are not recorded in the accounts | Historical Cost Principle |
List three different types of business activities | Financing, Operating, Investing |
Give an example of financing | Issuing Common Stock Paying Dividends Borrowing Money (Notes Payable, Bonds Payable, etc.) Repaying Loans |
Give an example of Investing | Purchasing Equipment Purchasing land Selling investment securities selling a building |
Give an example of Operating | Revenues: Sales of products or services Receipt of interest income Expenses: Payment of wages payment of selling expenses payment of interest expense |
What are the four financial statements? | Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows |
What is the purpose of an Income Statement and who are the primary users? | Represents revenues an expenses for a period of time |
What is the purpose of a Statement of Retained Earning's and who are the primary users | Shows the amounts and causes of changes in retained earning during the period |
What is the purpose of a Balance Sheet and who are the primary users? | Reports assets and claims at a specific point in time |
What is the purpose of Statement of Cash Flows and who are their primary users? | Provides financial information about the cash receipts and cash payments of a business for a specific period of time |
What is the accounting equation? | Assets= Liabilities + Stockholders' Equity |
What does Debit mean? What does credit mean? | Debit means "on the left" and is abbreviated Dr. Credit mean "on the right" and is abbreviated Cr. |