How Bookkeeping helps you in Cost Saving, Tax Saving and Smooth Business Runn...
Sample basic gaap fundamental questions
1. Sample GAAP Accounting Fundamental Questions
TESTS BALANCE SHEET VS INCOME STATEMENT
1) If something is classified as capex vs opex, does it go on BS or IS? Does opex go on BS or IS?
Capex goes on BS, opex goes on IS
TESTS ASSET VS EXPENSE, HOW TO BOOK AN ASSET INCLUDING DEPR EXPENSE AND DIFFERENCE BETWEEN
BALANCE SHEET AND INCOME STATEMENT
2) If you purchase a car for $100 with useful life of 10 year. What are the entries in year 1 and on what financial
statement?
DR Car asset $100 on BS
CR Cash $100 on BS
DR Depr exp $10 on IS
CR Accum Depr $10 on BS
TESTS GAAP ACCOUNTING VS CASH ACCOUNTING
3) What is the difference between cash and GAAP basis? GAAP basis recognition is when revenue is earned and
cost is incurred. Cash recognition is when cash is received or paid out
TESTS CONCEPT OF PREPAIDS, AMORTIZATION AND HOW TO BOOK. FUNDAMENTALS OF GAAP ACCOUNTING
4) Prepaids – How much cost do we recognize in January if we purchased a 12 month in cash software in January
for $120? And what are the entries in Jan and on what financial statement?
Amortize for 12 months, $10
Jan
Dr Prepaid $120 on BS
Cr Cash $120 on BS
Dr Software Ex $10 on IS
Cr Prepaid $10 on BS