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Core Financial Accounting Flashcards

6 cards from real IKM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Core Financial Accounting flashcards as text

  1. What is the difference between accounts payable and accounts receivable?

    Answer: AP is money owed to suppliers; AR is money owed by customers

    AP represents money owed to suppliers; AR represents money customers owe the company.

  2. Which ratio measures ability to pay short-term obligations with most liquid assets?

    Answer: Quick ratio (Acid-test)

    The quick ratio compares cash, securities, and receivables to current liabilities, excluding inventory.

  3. What is the purpose of an adjusting journal entry?

    Answer: Update account balances for accruals and deferrals at period end

    Adjusting entries ensure revenues and expenses are recognized in the correct period.

  4. Under GAAP, which inventory method is NOT permitted?

    Answer: All three are permitted

    GAAP permits FIFO, LIFO, and weighted average for inventory valuation.

  5. What is goodwill in accounting?

    Answer: Excess of purchase price over fair value of net assets in an acquisition

    Goodwill arises when a company is acquired for more than the fair value of its net assets.

  6. What does the cash flow statement classify as operating activities?

    Answer: Cash from customers and payments to suppliers

    Operating activities include cash flows from core business operations.