FINAL EXAM STUDY GUIDE
The final exam consists of 100 multiple-choice questions from the information presented in Chapter 1 through Chapter 13. Each question is worth 2.5 points. This study guide indicates the items you should review before taking the exam. GOOD LUCK!
1. Know the 3 forms of business entities
2. Know the definitions of revenues and expenses
3. Know the difference between internal and external users
4. FASB – responsible for GAAP (accounting principles)
5. Accounting Equation
6. Know the 3 activities that business engage in and give examples of each activity. (These 4 questions also relate to Chapter 12, The Statement of Cash Flows) 7. The International Accounting Standards Board is responsible for developing a single set of worldwide accountings standards (IFRS). 8. These standards will help companies to reduce accounting costs, make it easier to acquire foreign companies, and facilitate comparisons between foreign companies. 9. Know the primary objective of financial reporting
10. What makes information relevant?
11. Financial information should be understandable to whom
12. Balance Sheet – lists assets, liabilities and owners’ equity 13. Income Statement – revenues minus expenses equal net income 14. Net Income = Revenues - Expenses
15. Assets are recorded at historical/original cost because it is objective and verifiable
1. Review various source documents. Source documents indicate a transaction has occurred. Ex: Invoice, check, time card, shipping/receiving documents. 2. How do transactions affect the Accounting Equation? For example, know the effects for the following transactions: owner invests in business; purchase supplies for cash; purchase supplies on account; earn a revenue and receive cash; earn a revenue and receive a promise of cash at a later date.
3. Left side = Debit; Right side = Credit
4. Initial recording of transaction is made in a journal/general journal (called journal entry, journalizing). The entry is then posted to ledger/general ledger. 5. Know what is meant by a double-entry accounting system
6. What is the purpose of a trial balance.
7. Difference between Accounts Receivable and Accounts Payable
1. Accrual vs. Cash basis
When is revenue recognized with respect to accrual accounting? When is revenue recognized with respect to cash basis accounting? When are adjusting entries required?
2. Review the following adjusting entries: Supplies, Unearned Revenues/Advance Payments, Depreciation, and Accrued Salaries and Wages 3. Closing entries: Revenue and expense accounts are closed to Retained Earnings at the end of the year.
1. What is a cash equivalent?
2. Which asset is most liquid?
3. Review bank reconciliations (Deposit in Transit, Outstanding Checks, Service Charges, Interest Earned, Errors) 4. Review controls over cash, especially for cash sales
5. Can a foolproof Internal Control system be designed?
6. What accounting function can be performed only by a CPA?
1. Know and explain credit terms – i.e. 2/10, n/30
2. Know the shipping terms FOB shipping point and FOB destination point. Who owns the inventory when it is in transit? 3. Know difference between Accounts Receivable and Notes Receivable 4. 2 methods for accounting for Bad Debts are ______and _____ (pg 338-339) 5. Calculate Net Realizable Value of Accounts Receivable
6. Calculate interest for notes receivable.
1. Gross Profit = Sales – Cost of goods sold
2. Notes to Financial Statements provide full disclosure
3. Inventory is an asset/current asset. When inventory is sold, it becomes an expense (cost of goods sold). This is an example of the matching principle. 4. Multiple-step Income Statement (which includes Gross Profit) is generally used by merchandisers and retailers. 5....
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