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WorksheetsUS GAAP LT - Quick test
Total questions: 14
Worksheet time: 7mins
What is US GAAP?
US GAAP is a set of rules and guidelines that companies in the US and other countries follow to prepare financial statements.
US GAAP is a federal tax system that regulates how companies must report their income and expenses to the IRS.
US GAAP is an accounting software used by U.S. companies to automatically generate financial statements and comply with tax regulations.
US GAAP is a government agency responsible for auditing the financial reports of companies listed on the U.S. stock exchange.
Who sets US GAAP?
Internal Revenue Service (IRS)
International Accounting Standards Board (IASB)
Financial Accounting Standards Board (FASB)
International Federation of Accountants (IFAC)
Which statement best defines accrual accounting?
Recording transactions when cash is received or paid
Recording the financial effects of transactions and events when they occur, regardless of cash flow
Recording only revenues when earned but expenses when paid
Recording only non-cash transactions
Which option correctly matches the concept to its focus: Accrual, Deferral, Allocation?
Future amounts expected; delayed recognition of past cash flows; assigning amounts by plan or formula
Past cash receipts only; future obligations only; estimating revenues
Immediate cash recognition; tax planning; budgeting
Recognizing only gains; recognizing only expenses; recognizing only assets
Under ASC 210, which criterions determine whether an asset or liability is classified as current?
Expected to be realized, sold, settled, or consumed within one year or within the entity’s operating cycle, whichever is longer
According to whether the asset or liability is tangible or intangible.
If the asset or liability is expected to be realized or settled beyond one year or beyond the normal operating cycle of the business.
If the asset or liability is expected to generate income or expenses within the next five years.
Why does having postings in the correct assets/liabilities account matter for financial statements — in this case specifically in the current/non-current division?
Because it helps the system calculate cash flow automatically.
Because auditors only check current accounts, not non-current ones.
Because non-current accounts always mean losses and current ones mean profits.
Because this classification affects how liquidity and solvency are presented in financial statements, which impacts financial ratios and decision-making.
Under ASC 340, prepaid expenses are best described as which of the following?
Long-term intangible assets amortized over several years
Liabilities recognized when services are received before payment
Assets paid in advance that are used up or expire within the entity’s normal operating cycle
Contra-asset accounts that reduce receivables
ASC 326 (CECL) requires the allowance for credit losses (bad debt provision) to adjust a financial asset to which amount?
Historical cost
Fair value at the reporting date
Net amount expected to be collected
Present value of future cash flows discounted at the risk-free rate
Under ASC 450, when is a loss contingency provisioned and charged to P&L?
Whenever a loss is possible regardless of estimability
Only when it is probable and the amount can be reasonably estimated
Only when the exact amount is known
Never; only disclosure is required
Under ASC 505, what does equity represent for a company?
The total value of assets owned by shareholders
Owners’ residual interest in assets after deducting liabilities
The company’s market capitalization based on share price
The sum of issued share capital and paid-in capital only
Bacardi declares a cash dividend. How does ASC 505 indicate this should be reflected in equity?
Increase in retained earnings
Recorded as an OCI item
Recognition of declared dividends reducing equity
Increase in owner contributions
Under ASC 830, the functional currency should be determined based on:
The currency that results in the least translation adjustments.
The currency of the primary economic environment in which the entity operates. It focuses on where the entity primarily generates and expends cash
The local currency of the country where the entity operates.
The currency used for the parent company’s consolidated financial statements.
Monetary items (cash, receivables, payables) are remeasured at the current rate at each balance sheet date - This concept refers to:
Foreign Exchange
FX rates
FX Realized
FX Unrealized
Even if we don’t manage P&L, how could our BS decisions impact the Income Statement?
Because changes in asset balances automatically increase company profit.
Certain Balance Sheet decisions like writing off, accruing liabilities, or adjusting provisions, create journal entries that impact revenues or expenses, thus affecting P&L
Balance Sheet decisions only affect cash flow and never touch P&L accounts.
The Income Statement is independent, so Balance Sheet decisions cannot have any effect
