The statement of changes in equity shows how equity changed over a specific period.
The principle that requires revenue to be recognized when it is earned and realizable is the Revenue Recognition Principle.
Assets that are expected to be converted to cash or used up within one year are classified as Current Assets.
A company’s ability to meet its short-term obligations using its most liquid assets is measured by the Acid-Test Ratio.
The allocation of the cost of an intangible asset over its useful life is called Amortization.
The financial statement that shows the cash inflows and outflows from operating, investing, and financing activities is the Cash Flow Statement.
The matching principle requires expenses to be recognized in the same period as the related revenues they help generate.
A budget that is prepared for various levels of activity within a relevant range is called a Flexible Budget.
When the market rate of interest is higher than the coupon rate, a bond will typically sell at a Discount.
A decrease in the value of an asset due to wear and tear, obsolescence, or other factors is referred to as Depreciation.
The difference between a company’s total assets and its total liabilities is its Owner’s Equity.
A company’s financial performance and financial position are analyzed using Financial Ratios.
The cost of inventory sold during a period is calculated using the Cost of Goods Sold formula.
The method of inventory valuation that assumes the earliest acquired goods are the first to be sold is FIFO (First-In, First-Out).
The financial statement that presents the cash inflows and outflows related to a firm’s operating, investing, and financing activities is the Statement of Cash Flows.
The principle that requires an expense to be recognized when it is incurred, not necessarily when cash is paid, is the Expense Recognition Principle (Matching Principle).
Liabilities that are expected to be settled within one year or the operating cycle, whichever is longer, are classified as Current Liabilities.
The financial statement that reports the financial position of a company at a specific point in time is the Balance Sheet.
The allocation of the cost of a tangible fixed asset over its useful life is called Depreciation.
The profitability ratio that indicates the amount of net income generated for each dollar of sales is the Profit Margin Ratio.
The accounting principle that states that an asset should be recorded at the amount originally paid for it, regardless of its current market value, is the Historical Cost Principle.
A company’s financial leverage refers to the use of debt financing to increase its return on equity.
The valuation method that values inventory at the most recent purchase cost is LIFO (Last-In, First-Out).
The financial statement that provides a summary of a company’s revenues and expenses over a specific period is the Income Statement.
The difference between total assets and total liabilities is the Owner’s Equity (Net Assets).
The principle that requires financial information to be complete, neutral, and free from error is the Faithful Representation Principle.
A budget that is prepared for a single level of activity is called a Fixed Budget.
The inventory costing method that uses the weighted average cost per unit is the Weighted Average Cost Method.
The profitability ratio that measures the return generated on shareholders’ equity is the Return on Equity (ROE) ratio.
The financial statement that shows how a company’s retained earnings have changed over a specific period is the Statement of Retained Earnings.
The process of transferring information from the journal to the ledger is called Posting.
The equity method of accounting is used when a company has significant influence over another company, typically demonstrated by owning 20-50% of the other company’s voting stock.
A company’s return on assets (ROA) ratio measures its ability to generate profit from its assets.
The cost incurred to acquire a non-current asset, such as land, is known as its Purchase Price.
The principal function of a trial balance is to ensure that debits and credits in the accounting records are in balance.
The financial statement that presents a company’s revenues, expenses, and net income or loss for a specific period is the Income Statement.
The cost of goods sold (COGS) formula is Opening Inventory + Purchases – Closing Inventory.
The method of inventory valuation that assumes the first units purchased are the first units sold is the First-In, First-Out (FIFO) method.
The financial statement that provides a snapshot of a company’s financial position at a specific point in time is the Balance Sheet.
The accrual basis of accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash is received or paid.
The financial statement that shows the changes in a company’s equity during a specific period is the Statement of Changes in Equity.
The cost of goods available for sale minus the ending inventory gives the Cost of Goods Sold (COGS).
The basic accounting equation is Assets = Liabilities + Owner’s Equity.
The financial statement that explains the changes in a company’s cash position from operating, investing, and financing activities is the Statement of Cash Flows.
The accounting principle that requires expenses to be recognized in the same period as the revenue they help generate is the Matching Principle.
Expense is recorded in the accounting records when cash is paid.
The net sales of Fresh Foods were Rs. 200,000 for the current month, with an ending inventory of Rs. 50,000.
The straight-line method of depreciation ignores fluctuations in the rate of asset usage.
Current Ratio indicates a firm’s ability to pay current liabilities in the shortest possible time.
Financial statements prepared by a business firm are most likely to be tentative in nature.
Which ratio indicates a firm’s ability to meet immediate interest payment? Times Interest Earned ratio.
The cash basis of accounting is often used by merchandising firms.
A transaction caused a Rs. 10,000 decrease in both assets and total liabilities. It could have been a repayment of a bank loan.
Under periodic inventory system, cost of goods sold is determined and recognized in the books of accounts at the time of sale of goods.
Revenue is recognized in the accounting records when the sale is made.
In the accounting cycle, closing entries are made after the adjusting entries.
Which of the following accounts are not closed at the end of an accounting period? Asset accounts.
The formula (Cost less salvage value/Total capacity in units x units extracted) refers to the depletion method.
Trial Balance is prepared to ensure arithmetical accuracy of accounting records.
Which of the following financial statements reflects the overall financial position of the business? Balance Sheet.
The product of the accounting cycle is the formal financial statements such as balance sheet and income statement.
Which of the following is an intangible asset? Copy rights.
Which ratio best reflects a company’s ability to meet immediate interest payment? Times interest earned.
One of the following is not an officer of a company: Share registrar.
Rebate on bill discounted (unearned discount) is a liability.
The straight-line method of depreciation ignores fluctuations in the rate of asset usage.
The net sales of Fresh Foods were Rs. 200,000. If the cost of goods available for sale was Rs. 180,000 and the gross profit rate was 35%, the ending inventory must have been Rs. 50,000.
Under periodic inventory system, cost of goods sold is determined and recognized in the books of accounts at the time of sale of goods.
A transaction caused a Rs. 10,000 decrease in both assets and total liabilities. This transaction could have been collection of a Rs. 10,000 account receivable.
Which of the following is least important in determining the fair market value of a share? The par value of share.
Financial statements prepared by a business firm are most likely to be tentative in nature.
Which of the following transactions represents an expense? Received a telephone bill amounting to Rs. 550 to be paid within ten days.
Which of the following accounts are not closed at the end of an accounting period? Drawing accounts.
In the accounting cycle, closing entries are made after the adjusting entries.
If we add the average number of days to turn the inventory over and the average age of receivables, we arrive at the company’s operating cycle.
