Financial Accounting Flashcards
7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Accounting flashcards as text
Under the accrual basis of accounting, when should revenue generally be recognized?
Answer: When the performance obligation is satisfied
ASC 606 recognizes revenue when (or as) control of goods or services transfers, satisfying the performance obligation.
A company prepays a 12-month insurance policy for $12,000 on October 1. What is the prepaid insurance balance at December 31?
Answer: $9,000
Three months ($3,000) have expired, leaving $9,000 of prepaid insurance.
Which inventory method, during a period of rising prices, generally results in the highest reported net income?
Answer: FIFO
FIFO charges older, cheaper costs to cost of goods sold, so gross profit is highest when prices rise.
Which financial statement reports a company's assets, liabilities, and equity at a specific point in time?
Answer: Balance sheet
The balance sheet (statement of financial position) is a snapshot as of a single date.
Equipment costing $50,000 with a $5,000 salvage value and a 5-year life is depreciated straight-line. What is annual depreciation expense?
Answer: $9,000
($50,000 − $5,000) ÷ 5 = $9,000 per year.
Under the allowance method, writing off a specific uncollectible account receivable has what effect?
Answer: Has no effect on net accounts receivable
The write-off reduces both accounts receivable and the allowance equally, leaving net receivables unchanged.
Which characteristic is a fundamental qualitative characteristic of useful financial information under the FASB Conceptual Framework?
Answer: Faithful representation
Relevance and faithful representation are fundamental; comparability, verifiability, timeliness, and understandability are enhancing.