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Exam 17: Understanding Accounting and Financial Information

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Question 151

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Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization.

A) True
B) False

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Question 152

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The return on sales ratio measures a firm's use of leverage.

A) True
B) False

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Question 153

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Explain the meaning of the fundamental accounting equation and its relation to the balance sheet. If it is helpful, create an example using numbers.

The area of accounting that provides managers inside the organization with information they need to make decisions is called

A person's pulse rate and blood pressure are indicators of a person's health. Similarly, ________ can help assess the health of a business.

A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow. Ratios that accountants utilize to measure the efficient use of assets are called ________ ratios.

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

Which of the following agencies would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Kentucky's Department of Transportation?

The balance sheet is composed of the following types of accounts:

The main reason an accountant would conduct a trial balance is to

As a bank loan officer, you are considering a loan application by Peak Performance Sporting Goods. The company has provided you with the following information: Peak Performance's debt to owners' equity ratio (rounded to the nearest tenth of a percent) is:

Accounting, as the language of business, is solely concerned with providing information useful to managers of profit-seeking firms.

An extremely high inventory turnover ratio may represent lost sales due to holding inadequate stocks of merchandise.

The ________ shows the assets, liabilities, and owners' equity of a firm, at a specific point in time.

Net income before taxes is found by deducting total operating expenses from gross profit before factoring tax expense.

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

When creating the income statement, which of the following statements is accurate?

In addition to the tasks of recording and classifying accounting information, the best accounting software programs currently available for small businesses have the ability to make financial decisions, thus eliminating the need for owners of small businesses to consult with accountants or understand accounting terminology.

Barkatorium Pet Supplies recently hired an accountant to make sense of each day's transactions, and keep better financial records for the business. The accountant showed the owner that the ledger in a computerized accounting system would automatically take entries and post them to the correct accounts in the ledger, making the bookkeeping tasks much easier.