Chapter 1

Question 1

What is the equation for rate of return?

Answer 1

(Share price appreciation, dividend, any increase in value)/ initial investment

Question 2

What is the going concern assumption?

Answer 2

Company to last long enough to fulfil commitment

Question 3

What is the monetary unity assumption?

Answer 3

Money is the common denominator

Question 4

What is the economic entity assumption?

Answer 4

Company keeps their activity separate from the owners and shareholders

Question 5

What is the periodicity assumption?

Answer 5

Company can divide its economic activities in to periods

Question 6

What art the three measurements principles of the financial statements?

Answer 6

Fair value, historical value, and lower market value (KNOW WHAT THEY ARE)

Question 7

What is the revenue recognition principle of financial statements?

Answer 7

Recognized revenue when it is earned regardless if it has been paid or not (Deferred/ Unearned revenue)

Question 8

What is the expense recognition principle of financial statements?

Answer 8

Recognized expense when is it accrued in periods
(Systemic allocation -> depreciation, amortization)

Question 9

What is the full disclosure principle of financial statements?

Answer 9

Include all information unless cost to gather exceeds profits

Question 10

What is comprehensive income?

Answer 10

All change in the equity section excluding ownership transaction (Dividends, issuance of stocks)