Lesson 1 through 4 Accounting

What does ALOE stand for?

• Assets, Ledgers and Owner's Equity

• Assets, Liabilities and Owner's Equity

• Assets, Liabilities and Owner's Expenses

• Accounts, Liabilities and Owner's Equity

What is the formula for the basic accounting equation?

• Liabilities = Assets + Owner's Equity

• Assets = Liabilities - Owner's Equity

• Assets = Liabilities x Owner's Equity

• Assets = Liabilities + Owner's Equity

What does the term 'accounting' mean?

• The act of reporting data

• The act of collecting, organizing, and interpreting financial data

• The act of recording financial data to be used later

• The act of filing receipts from transactions

Which of the following is NOT a financial statement?

• Statement of retained earnings

• Income statement

• Statement of cash flows

• Accounting cycle

Why is accounting important to business?

• It lets a business owner know what their assets are worth.

• All of the answers are correct

• It lets a business owner know how much money they are spending.

• It provides the information that a business needs to file taxes with the IRS

  
  

How many basic accounting principles make up GAAP?

• 18

• 4

• 7

• 10

Which company, listed on the New York Stock Exchange would definitely be in breach of the Going Concern Principle?

• Company C, which shows a net cash outflow in its statement of cash flows.

• Company A, which has decided to issue new shares to foreign nationals

• Company B, which has made a net loss this financial year.

• Company D, which has run out of cash and is now not able to pay its creditors.

Michael, the majority shareholder of a company, decided to produce the company's balance sheet whose cash balance included the cash in his own bank account. Would Michael be allowed to do this by GAAP?

• Yes, because of the full disclosure principle.

• Yes, because of the going concern principle.

• No, because of the revenue recognition principle.

• No, because of the economic entity assumption.

Which of the following is an example of how publicly-traded companies can apply the principle of conservatism with their financial statements?

• None are correct

• Recognizing a potential gain from a lawsuit immediately.

• Recognizing accounts payable immediately on the financial statements

• Recognizing the cost of goods sold after the company's inventory has been exhausted.

GAAP sets the standards for the creation of what?

• Statement of Retained Earnings

• Income Statement

• All answers are correct

• 
  Balance Sheet