Exam 16: Understanding Accounting and Financial Information

FIFO and LIFO are two common methods used to compute the amortization of tangible assets.

A journal is where the initial record of a day's transactions is entered.

The Canadian government is a user of accounting information.

As the burden of taxes grows in the economy,the role of the auditor becomes increasingly important to the organization.

A balance sheet is composed of assets,liabilities,and revenues.

Assets are reported on the balance sheet.

One weakness of the acid-test ratio is that it puts too much emphasis on the ability to convert inventory quickly into cash.

In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.

Rent,salaries,insurance and amortization are all examples of the cost of goods sold.

The value of what stockholders own in a corporation is called:

Generally accepted accounting practices (GAAP)allow firms to choose among different methods of amortization and inventory valuation.

A balance sheet lists assets in order of their _________.

What is involved in forensic accounting?

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Your firm is a supplier to a major chain of discount stores.You have heard rumors that this chain of discount stores is in some financial difficulty.Which financial ratios would indicate the discount stores' ability to pay their short-term debts?

A firm's balance sheet reports its financial condition on a specific date.

Rents,salaries,utilities and insurance are all examples of operating expenses.

When valuing items in inventory for financial reporting purposes,generally accepted accounting practices require firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold.

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.