FA 1-6

Question 1

Accounting Term

Answer 1

Definition

Question 2

Balance Sheet

Answer 2

Snapshot of assets, liabilities, and equity at a given point in time.

Question 3

Income Statement

Answer 3

Report summarizing revenues and expenses over a period, showing profit or loss.

Question 4

Cash Flow Statement

Answer 4

Statement showing inflows and outflows of cash from operating, investing, and financing activities.

Question 5

Equity

Answer 5

Owners’ claims on the company’s assets after liabilities are paid.

Question 6

Liabilities

Answer 6

Obligations the company owes to outside parties.

Question 7

Assets

Answer 7

Resources owned by a company with future economic benefits.

Question 8

Revenue

Answer 8

Income earned from providing goods or services.

Question 9

Expenses

Answer 9

Costs incurred in earning revenue, such as salaries or rent.

Question 10

Retained Earnings

Answer 10

Accumulated net income retained by a company for reinvestment.

Question 11

Accrued Liabilities

Answer 11

Liabilities for expenses incurred but not yet paid.

Question 12

Notes Payable

Answer 12

Promissory notes signed by a borrower, promising to pay a specific amount.

Question 13

Accounts Payable

Answer 13

Amounts the company owes to suppliers for purchases on credit.

Question 14

Inventory

Answer 14

Goods held for sale to customers.

Question 15

Prepaid Expenses

Answer 15

Expenses paid in advance, like insurance or rent.

Question 16

Property, Plant, and Equipment (PPE)

Answer 16

Long-term assets used in operations, such as buildings and machinery.

Question 17

Share Capital

Answer 17

Investment made by shareholders into the company through stock purchase.

Question 18

Intangible Assets

Answer 18

Non-physical assets like patents or trademarks.

Question 19

Auditor’s Report

Answer 19

Document providing opinion on the fairness of financial statements.

Question 20

Going Concern

Answer 20

Assumption that the business will continue operating into the future.

Question 21

Current Ratio

Answer 21

Liquidity ratio indicating ability to pay short-term obligations.

Question 22

Depreciation

Answer 22

Allocation of asset cost over its useful life.

Question 23

FIFO

Answer 23

First-in, first-out inventory valuation method.

Question 24

LIFO

Answer 24

Last-in, first-out inventory valuation method.

Question 25

Double-entry System

Answer 25

System where every transaction has a debit and credit entry.

Question 26

Journal Entry

Answer 26

Recording of a transaction in the accounting records.

Question 27

T-account

Answer 27

Tool used to represent and analyze individual account changes.

Question 28

Cost of Goods Sold (COGS)

Answer 28

Direct costs of goods sold to generate revenue.

Question 29

Gross Profit

Answer 29

Revenue minus COGS, showing gross earnings.

Question 30

Net Income

Answer 30

Total profit after all expenses are deducted from revenue.

Question 31

Trial Balance

Answer 31

Listing of all accounts to check for balanced debits and credits.

Question 32

Working Capital

Answer 32

Current assets minus current liabilities; shows operational liquidity.

Question 33

Deferred Revenue

Answer 33

Cash received in advance for goods or services not yet provided.

Question 34

Deferred Expense

Answer 34

Expenses incurred but recognized later, such as depreciation.

Question 35

Accrued Expenses

Answer 35

Costs incurred but not yet paid, such as accrued wages.

Question 36

Current Assets

Answer 36

Assets expected to be converted to cash within one year.

Question 37

Liquidity

Answer 37

The ease of converting assets to cash.

Question 38

Solvency

Answer 38

Ability to meet long-term obligations.

Question 39

Return on Assets (ROA)

Answer 39

Measure of profit generated per dollar of assets.

Question 40

Return on Equity (ROE)

Answer 40

Profitability ratio showing return generated on shareholders' equity.

Question 41

Profit Margin

Answer 41

Net income divided by revenue; an indicator of profitability.

Question 42

Amortization Schedule

Answer 42

Table detailing payments over time, typically for loans.

Question 43

Variable Cost

Answer 43

Cost that varies with production volume.

Question 44

Fixed Cost

Answer 44

Cost that remains constant regardless of production.

Question 45

Break-even Point

Answer 45

Production level where total revenue equals total costs.

Question 46

Gross Margin

Answer 46

Gross profit divided by revenue, indicating production efficiency.

Question 47

Inventory Turnover

Answer 47

Ratio indicating how many times inventory is sold and replaced.

Question 48

Accounts Receivable

Answer 48

Money owed by customers for credit sales.

Question 49

Bad Debt Expense

Answer 49

Estimated loss from uncollectible receivables.

Question 50

Allowance Method

Answer 50

Method for accounting bad debts using allowance for doubtful accounts.

Question 51

Direct Write-Off Method

Answer 51

Method for writing off bad debt when it becomes uncollectible.

Question 52

Sales Tax Payable

Answer 52

Liability for sales tax collected from customers, payable to the government.

Question 53

Dividend Yield

Answer 53

Ratio showing dividend as a percentage of stock price.

Question 54

Discount Rate

Answer 54

Interest rate used to determine present value.

Question 55

Deferred Tax Asset

Answer 55

Asset recognized when taxes paid exceed tax expense.

Question 56

Deferred Tax Liability

Answer 56

Liability recognized when tax expense exceeds taxes paid.

Question 57

Shareholders' Equity

Answer 57

Owners' claims to the residual interest in the company.

Question 58

Book Value

Answer 58

Asset's value based on its cost less accumulated depreciation.

Question 59

Market Value

Answer 59

Asset's value based on market price.

Question 60

Financial Ratios

Answer 60

Ratios used to assess various aspects of a company's performance.

Question 61

Operating Cycle

Answer 61

Time taken to turn inventory into cash.

Question 62

Adjusted Trial Balance

Answer 62

Trial balance after adjusting entries, ensuring accurate reporting.

Question 63

Creditworthiness

Answer 63

Assessment of a borrower's likelihood to repay debts.

Question 64

Asset Turnover Ratio

Answer 64

Ratio measuring sales per dollar of assets.

Question 65

Fixed Asset Turnover

Answer 65

Ratio of revenue to fixed assets, showing efficiency.

Question 66

Current Portion of Long-Term Debt

Answer 66

Current portion of long-term obligations payable within a year.

Question 67

Treasury Shares

Answer 67

Shares reacquired by the company, reducing outstanding shares.

Question 68

Callable Bonds

Answer 68

Bonds callable by the issuer before maturity.

Question 69

Convertible Bonds

Answer 69

Bonds that can be converted into stock.

Question 70

Debt Service Coverage Ratio

Answer 70

Ratio measuring a company's ability to pay debt obligations.

Question 71

Present Value

Answer 71

Value today of a future cash flow.

Question 72

Future Value

Answer 72

Value in the future of a current cash flow.

Question 73

Working Capital Ratio

Answer 73

Ratio showing working capital as a percentage of current liabilities.

Question 74

Accounts Receivable Turnover

Answer 74

Ratio of credit sales to accounts receivable, showing efficiency.

Question 75

Operating Cash Flow

Answer 75

Cash generated from core business activities.

Question 76

Non-operating Income

Answer 76

Income not related to core operations, like investment income.

Question 77

Payout Ratio

Answer 77

Percentage of earnings paid to shareholders as dividends.

Question 78

Revaluation Surplus

Answer 78

Increase in asset values due to revaluation, not included in profit.

Question 79

Capital Lease

Answer 79

Lease in which the lessee assumes asset ownership.

Question 80

Operating Lease

Answer 80

Lease in which the lessee does not assume ownership.

Question 81

Materiality

Answer 81

Concept indicating the significance of information in decision-making.

Question 82

Comparability

Answer 82

Comparability of financial statements across periods.

Question 83

Reliability

Answer 83

Information that is dependable and accurate.

Question 84

Substance over Form

Answer 84

Principle that accounting should reflect reality, not just legal form.

Question 85

Consistency

Answer 85

Using the same methods over time for consistency in reporting.

Question 86

Economic Value Added (EVA)

Answer 86

Value created beyond required return on investment.