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Exam 17: Understanding Accounting and Financial Information

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Question 101

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Banks are likely to request a firm's balance sheet when determining whether or not to loan money to the firm. However, banks would have little interest in the firm's income statement since it covers a short period of time.

A) True
B) False

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Question 102

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General expenses include office salaries, rent, and insurance.

A) True
B) False

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Question 103

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An important difference between accounting and other business functions, such as marketing and management, is that

Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered, and/or from other revenue sources.

One of the key financial statements prepared in the fifth step of the accounting cycle is

The cost of goods sold includes all the costs of buying and keeping merchandise available for sale.

The job of reviewing and evaluating the information used to prepare a company's financial statements is referred to as auditing.

Barkatorium Pet Supplies established a line of credit with its local bank and used (borrowed) $95,000 against it to purchase its first year's inventory. Since it is required to repay the money before the end of its fiscal year, the company's accountant lists this liability with the current liabilities on the balance sheet.

As U.S. firms focus on cost cutting in order to stay competitive with producers in low-wage countries, they will rely on ________ to create strategies to help reduce costs.

Liquidity ratios are of particular importance to stockholders, but have little relevance for creditors.

Cash flow statements identify three sources of cash receipts and disbursements: assets, liabilities, and owners' equity.

The accounting profession follows generally accepted accounting principles as defined by

When an accountant writes off the cost of a tangible asset over its estimated lifetime, it is called depreciation.

Which of the following is a key step in the accounting cycle?

Patents and copyrights are classified as ________ on the Balance Sheet.

Resources that a firm owns are called

Churches, schools, and charitable organizations all need accountants.

Similar to the example of FIFO and LIFO inventory accounting methods in the text, a college store purchased sweatshirts for the upcoming fall semester. Using the following data, where a total of 100 sweatshirts were purchased by the store and placed in inventory, select the correct statement from the following choices.  

Which of the following is an example of a financial transaction?

The accounting profession is divided into 5 key working areas, two of which are