ACG 5026 FSU Fennema Practice Test Questions and Correct Answers
4 views 0 purchase
Course
ACG 5026
Institution
ACG 5026
Balance Sheet A financial statement that reports assets, liabilities, and owner's equity on a specific date/at a point in time.
Lists the company's investments and sources of financing using the accounting equation § Assets=liabilities+equity § Statement of financial position
Statement of Cash ...
ACG 5026 FSU Fennema Practice Test
Questions and Correct Answers
Balance Sheet ✅A financial statement that reports assets, liabilities, and owner's
equity on a specific date/at a point in time.
Lists the company's investments and sources of financing using the accounting
equation
§ Assets=liabilities+equity
§ Statement of financial position
Statement of Cash Flows ✅A financial statement that provides financial information
about the cash receipts and cash payments of a business for a specific period of time.
§ Operating cash flows differ from net income because of differences in the time that
revenues and expenses are recorded and the time the cash is received and paid
§ Where did the money come from, where did it go
§ Operating, investing, financing
Income Statement ✅A financial statement showing the revenue and expenses for a
fiscal period.
Reports the results of a company's operating activities over a period of time
§ Revenues-expenses=net income
§ Statement of income, statement of earnings, statement of operations, statement of
profit and loss
statement of stockholders' equity ✅a financial statement that shows changes in a
corporation's ownership for a fiscal period
Contributed capital
· Amounts from issuing new stock during the period
· Common stock and additional paid-in capital
§ Retained earnings
· Cumulative income since the company began business minus dividends paid out to
shareholders
§ Other stockholders' equity changes
GAAP (Generally Accepted Accounting Principles) ✅§ Standards and accepted
practices designed to guide the preparation of financial statements
§ Based on underlying principles
§ Allows considerable discretion in preparation
§ Enables external users to rely on audited financial statements
,§ FASB ✅private organization setting rules under the offices of the government (SEC)
o Currently establishes accounting standards in the US
o Developed a conceptual framework to serve as a guide for accounting issues not
covered by standards
SEC (Securities and Exchange Commission) ✅final say on accounting
Securities act of 1934 led to the SEC
o Regulates the issuance and trading of securities in the US
o Companies with more than $10 million of assets and whose securities are held by
more than 500 owners must file annual and other periodic reports with the SEC
§ Auditor's report ✅· The auditor's report is a statement to the board of directors of the
company and to the shareholders of the company by an independent auditor
· It expresses an opinion as to whether the financial statements present fairly the
financial activities of the company and whether the financials were prepared in
accordance with GAAP
· A "clean" audit opinion indicated that the auditors do believe the financial statements
present fairly the economic conditions of the firm. It does NOT state that the statements
are "Accurate"
· Adverse opinion- something is wrong
· Going concern opinion- this company may not be around for long, even though it is
correct
· Clean report- presented fairly
o Regulation and oversight SOX ✅§ Sarbanes-Oxley act of 2002
· Developed by Congress due to concerns over the quality of corporate financial
reporting
· Goal was to increase the level of confidence that external users have in financial
statements
· SOX then established the Public Accounting Oversight Board (PCAOB) to approve
auditing standards and to monitor the quality of financial statements and audits (GAAP)
· SOX means accounting is not self-regulated
Matching Principle (Expense Recognition) ✅§ Matching focuses on the timing of
recognition of expenses after revenue recognition has been determined
§ This principle states that the efforts of a given period (expenses) should be matched
against the benefits (revenues) they generate
§ For example, the cost of inventory is initially capitalized as an asset on the balance
sheet; it is not recorded in Cost of Goods Sold (expense) until the sale is recognized
§ Important to accrual accounting
Accrual Accounting ✅revenues accounted when we earn them, expenses accounted
when they occur
, o Matching determines when expenses are put on the income statement
Constructing a Balance Sheet ✅Assets
§ Assets ✅Resources that are expected to provide a company with future economic
benefits. Expenditures not capitalized are "Expensed" on the income statement
o Capitalize means call it an asset
o Assets are cash, A/R, inventory
§ Help us beyond the current year, tangible, intangible (goodwill, copyrights, etc)
current assets ✅§ Assets are expected to be converted into cash or used in operations
within the next year, or within the next operating cycle
§ Listed in order of liquidity
§ Cash- currency, bank deposits, certificates of deposit and other cash equivalents
· Cash equivalents- can be turned to cash quickly
o Ex) savings accounts
§ Marketable securities ✅short-term investments that can quickly be sold to raise cash
§ Accounts receivable ✅amounts due to the company from customers arising from the
sale of products or services on credit
§ Inventory ✅goods purchased or produced for sale to customers
§ Prepaid expenses ✅costs paid in advance for rent, insurance, or other services
Noncurrent Asset ✅§ Listed after current assets on the balance sheet
§ Not expected to expire or be converted into cash within one year, or within the next
operating cycle
§ Referred to as long-term assets
Long term financial investments ✅investments in debt securities or shares of other
firms that management does not intend to sell in the near future
§ Property, plant and equipment (PPE) ✅land, factory, buildings, warehouses, office
buildings, machinery, office equipment, and other items used in the operations of the
company
§ Intangible and other assets ✅patents, trademarks, franchise rights, goodwill, and
other items that provide future benefits, but do not possess physical substance
Measuring assets ✅o Assets are valued in a variety of ways:
§ Historical cost (property, plant, equipment)
· Reliability
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller twishfrancis. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.99. You're not tied to anything after your purchase.
