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HBX Core Financial Accounting Study Guide Solutions

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HBX Core Financial Accounting Study Guide Solutions Accelerated Depreciation Methods - ANSWER-Depreciation methods that recognize more depreciation expense in the early years and less in the later years. Double-declining balance is an example of an accelerated depreciation method. Accounting E...

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hbx core financial accounting study guide solution

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©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED

FIRST PUBLISH OCTOBER 2024

HBX Core Financial Accounting Study

Guide Solutions

Accelerated Depreciation Methods - ANSWER✔✔-Depreciation methods that recognize more

depreciation expense in the early years and less in the later years. Double-declining balance is an

example of an accelerated depreciation method.

Accounting Equation - ANSWER✔✔-Assets = Liabilities + Owners' Equity. This equation is fundamental

and must always be true in double entry accounting.

Accounting Period - ANSWER✔✔-The period of time for which the financial results are reported;

typically either a month or a quarter or a year.

Accounts Payable - ANSWER✔✔-Liability account used to show the obligation to pay suppliers who have

provided goods or services on credit terms.

Accounts Payable Turnover - ANSWER✔✔-Accounts Payable Turnover is a ratio that is used to measure

how efficiently a business is paying its vendors. It is calculated by dividing the credit purchases for the

period by the average accounts payable balance for the period. In the absence of credit purchases

information, we may use cost of goods sold as a substitute. The ratio represents how many times the

accounts payable turned over during the period. For most ratios in this course, we use averages when

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calculating ratios with balance sheet numbers, but this is not necessary and some may choose to use

beginning or ending balances.

Accounts Receivable - ANSWER✔✔-Asset account used to show the claim to receive cash at some future

date for goods or services that have been supplied to a customer on credit terms.

Accounts Receivable Turnover - ANSWER✔✔-Accounts Receivable Turnover is a ratio that is used to

measure how efficiently a business is collecting receivables from its customers. It is calculated by dividing

the credit sales for the period by the average accounts receivable balance for the period. In the absence

of credit sales information, we may use total sales as a substitute. The ratio represents how many times

the accounts receivable turned over during the period. For most ratios in this course, we use averages

when calculating ratios with balance sheet numbers, but this is not necessary and some may choose to

use beginning or ending balances.

Accrual - ANSWER✔✔-A revenue amount that is recorded after the revenue is earned but before the

payment is received or an expense amount that is recorded after it has been incurred but before the

payment has been made. In either case, for an accrual the exchange of cash is expected at some future

point after the initial revenue or expense is recognized.

Accrual Accounting Method - ANSWER✔✔-This is the accounting method taught in this course, followed

by most companies, and required under US GAAP and IFRS. The method follows the revenue recognition

principle, which says that revenue should be recognized in the period in which it is earned and realizable,

not necessarily when the cash is received and the matching principle which says that expenses should be

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recognized in the period in which the related revenue is recognized rather than when the related cash is

paid.

Accrued Expenses - ANSWER✔✔-Liability account used to record amounts at the end of an accounting

period to recognize expenses that were incurred in the period but for which no invoice has yet been

received nor payment has yet been made. Examples are salaries/wages payable, accrued rent expense,

accrued legal fees. When the accrual is made, the debit is to the appropriate expense account (payroll

expense, rent expense, legal expense) and the credit is to the accrued expense account, which is a

liability because it represents an obligation which will need to be paid in the future. Remember accrued

expenses are NOT expenses.

Accrued Liability - ANSWER✔✔-Liability accounts that record expenses that have been recognized on the

income statement but have not yet been paid. Similar to accrued expenses.

Accrued Payroll - ANSWER✔✔-An accrued expense recorded at the end of a financial period for amounts

of payroll that have been worked but not yet paid. It is a common type of accrued expense. See also

Salaries/Wages Payable.

Accrued Revenue - ANSWER✔✔-An asset account that records revenue that has been earned and

recognized on the income statement but not yet paid for by the customer. At the time of the accrual, we

debit the receivable account and credit the appropriate accrued revenue account. When the cash

transfer ultimately occurs, we debit the cash account and credit the receivable account.

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Accumulated Depreciation - ANSWER✔✔-A contra asset account that includes the cumulative total of all

depreciation expenses recorded to date for specific assets. The credit balance in this account offsets the

debit balance in the asset account which shows the original value of the asset. When the original asset

value is netted against the accumulated depreciation for the asset you arrive at the net book value of the

asset.

Accumulated other comprehensive income - ANSWER✔✔-An equity account that consists of cumulative

unrealized gains or losses on line items classified under other comprehensive income. It includes items

such as unrealized gains or losses on investments available for sale, foreign currency gains or losses, and

pension plan gains or losses.

Adjusting (Journal) Entries - ANSWER✔✔-Entries made to adjust the balances of asset and liability

accounts to reflect changes in their values due to the passage of time or another implicit transaction.

Allowance for Doubtful Accounts - ANSWER✔✔-A contra asset account that nets against Accounts

Receivable. It is generally set up as an estimate of accounts that will ultimately prove to be uncollectible.

It is then reduced when accounts are written off. It may be adjusted at period end to reflect any updated

estimates. May also be referred to as Reserve for Bad Debts.

Amortization - ANSWER✔✔-The method for recognizing the expense of long-lived intangible assets such

as patents, copyrights, and brands, over the life of the assets. Amortization is usually calculated similar to

straight-line depreciation. Some companies use an accumulated amortization account, while other

companies may directly reduce the value of the associated asset.

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