Financial Accounting

Question 1

Profit-and-loss statement

Answer 1

Shows how much money a company is making in this especially useful for potential investors and stakeholders.

Question 2

Balance sheet

Answer 2

Gives a snapshot of how much a business is worth a certain time and is a good indication of its long-term health.

Question 3

Cash-flow statement

Answer 3

Reveals the companies liquidity by tracking the cash flow-money or short-term investments-in and out of the company.

Question 4

Environmental accounting

Answer 4

Accounts for a myriad of environmental rules and regulations that oblige companies to mitigate the impact of business activities.

Question 5

Depreciation

Answer 5

Accounts for the decrease in value over time of tangible fixed assets in order to spread the cost of assets over their economic life.

Question 6

Amortization and depletion

Answer 6

Account for the decrease in value over time of a range of intangible assets, loans, and natural resources.

Question 7

Economic entity assumption

Answer 7

Transactions by businesses owned by one owner or individual are kept separate from transactions made by other companies owned by that group or individual.

Question 8

Monetary unit assumption

Answer 8

International economic activity is expressed in monetary terms, with all units assumed to be quantifiable, constant and not affected by inflation or deflation.

Question 9

Going concern assumption

Answer 9

The financial activities of the business will carry on indefinitely

Question 10

Time period assumption

Answer 10

Different operations of the business can be divided into arbitrary time.

Question 11

Full disclosure principle

Answer 11

All information, past, present, or future, which could affect financial performance must be disclosed, usually in the notes of financial statements.

Question 12

Historical cost principle

Answer 12

Assets and liabilities are valued at the buying price.

Question 13

Matching principle

Answer 13

The time period in which a business’s expense and revenue figures are collected always concurs.

Question 14

Revenue recognition principle

Answer 14

Really should be recorded at the moment when : a) goods or services are exchanged; b) assess can be converted to cash; c) it is earn-now he received.

Question 15

Conservatism

Answer 15

If there alternatives for reporting on an item, accountants should choose to report a lower amount of income or asset gain.

Question 16

Principle of materiality

Answer 16

Accountants may make a professional decision to go against anyone of the other principles.

Question 17

Accounting standards

Answer 17

Generally accepted principles standardize practice worldwide to ensure accuracy and prevent fraud.