HBX - Accounting Questions And Answers Latest Updates
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Course
HBX - Accounting
Institution
HBX - Accounting
nominal accounts - ️️end up on the income statement and only reflect activity for a
given account period such as sales, G&A exepnse, and interest expense (go back to $0
in the next accounting period) - revenue and expenses fall here
implicit transactions - ️️(1) Recognizing expenses rela...
HBX - Accounting
nominal accounts - ✔️✔️end up on the income statement and only reflect activity for a
given account period such as sales, G&A exepnse, and interest expense (go back to $0
in the next accounting period) - revenue and expenses fall here
implicit transactions - ✔️✔️(1) Recognizing expenses related to a prepaid asset
(2) Recognizing revenues related to deferred revenue (also called unearned revenue)
(3) Accruing of unrecorded expenses
(4) Accruing of unrecorded revenues
Real accounts - ✔️✔️end up on the balance sheet and maintain a cumulative balance
over time such as cash, accounts receivable, inventory, and long term debt - assets,
liabilities, and owner's equity fall here
Assets - ✔️✔️resources owned or controlled by an entity that will produce benefits in
the future.
Be purchased at a cost that is measurable
Produce probable economic benefit in the future
Result from a past event
Be owned or controlled by the entity
Liabilities - ✔️✔️obligations to pay a third party for resources provided to an entity.
It must impose a probable economic obligation on economic resources in the future
The obligation has to be to another entity
The event that created the obligation must have occurred in the past
Owners' equity - ✔️✔️funds contributed by owners as well as profits generated by the
business
Revenue - ✔️✔️money that a business receives from providing goods or services to a
customer
Expenses - ✔️✔️the costs associated with providing goods or services to a customer
Matching principle - ✔️✔️requires that a company match its expenses to the related
revenues in the accounting period to which they relate
Is Deferred revenue an asset or a liability? - ✔️✔️Liability
, Is Prepaid expense an asset or a liability? - ✔️✔️Asset
Conservatism - ✔️✔️require that businesses choose measurement methods that
anticipate and record future losses but don't anticipate and record future gains; meant to
keep business managers from using their discretion to report overly favorable financial
results;
Reliability - ✔️✔️information faithfully represents the underlying economics; 1) info is
valid 2) info is verifiable 3) info is unbiased
Historical Cost - ✔️✔️transactions are recorded at the actual price that existed at the
time of the transaction
Consistency - ✔️✔️managers make consistent accounting choices and estimates over
time
Materiality - ✔️✔️trivial matters don't have to be recorded or reported in detail in the
financial statement
Entity concept - ✔️✔️only the business that belongs to the business should be reported
in the financial statement of a firm (example of abuse of this concept is Enron)
Money Measurement - ✔️✔️the only values that can be measured in monetary terms
get recorded in the financial statement
Going concern - ✔️✔️business will continue to operate in the foreseeable future
Owner's equity accounts - ✔️✔️anything with stock, capital, or retained earnings
revenue accounts - ✔️✔️sales, anything with revenue
expense accounts - ✔️✔️cost of goods sold, anything with expense
is a check considered cash? - ✔️✔️yes
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