ACC Exam 2 Questions with Complete Solutions 2024/2025
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Course
ACC
Institution
ACC
ACC Exam 2 Questions with Complete Solutions 2024/2025
what is the matching concept and why is it important?
when should revenues/expenses be recognized? - ANSWERS- it's a term used in expense recognition to indicate the relationship between the effort expended and the revenue generated
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ACC Exam 2 Questions with Complete
Solutions 2024/2025
what is the matching concept and why is it important?
when should revenues/expenses be recognized? - ANSWERS- it's a term used in expense recognition to
indicate the relationship between the effort expended and the revenue generated
- recognize revenue when earned and recognize expense when incurred (GAAP approved); it's a more
accurate method
- ex: just did a service for something. got paid later. when does he recognize his revenue? a: back when
he did the service
what is an adjusting entry and why is it important?
what are the reasons to do adjusted entries? - ANSWERSthey are changes made to accounts at the end
of the accounting period to ensure that the revenue recognition and expense recognition principles are
followed. reasons include:
1. some events are not recorded daily because it is not efficient to do so
2. some costs are not recorded during the accounting period because these costs expire with the
passage of time rather than as a result of recurring daily transactions
3. some items may be unrecorded. an example is a utility service bill that will not be received until the
next accounting period
- adjustments are *required* every time a company prepares financial statements
, what is a prepaid cost?
when is it an asset or expense and when is it increased and decreased? - ANSWERS- prepaid expenses
are costs that expire either with the passage of time (ex: rent & insurance) or through use (ex: supplies)
- an adjustment for prepaid expenses results in an increase to an expense account and a decrease to an
asset account
internal control systems - ANSWERS- control environment
- risk assessment
- control activities
- information and communication
- monitoring
control environment - ANSWERS- it is the responsibility of top management to make it clear that the
organization values integrity and that unethical activity will not be tolerated
- often referred to as the "tone at the top"
risk assessment - ANSWERScompanies must identify and analyze the various factors that create risk for
the business and must determine how to manage these risks
control activities - ANSWERSto reduce the occurrence of fraud, management must design policies and
procedures to address the specific risks faced by the company
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