Exam 17: Understanding Accounting and Financial Information

A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time.

Sally prepares monthly financial statements for her client, Dent's Auto Body. Now, though, she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced. Sally will prepare a statement of cash flows in order to complete this step of the cycle.

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

The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting.

The ________ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

Activities of managerial accountants include measuring and reporting the costs of production, marketing, and other functions within the organization.

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

A loan officer at Bigbux Bank is considering a loan application from Portable Pet Care, Inc. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Portable Pet Care's statement of cash flows.

Diego owns and operates a small business with only four full-time employees and less than $700,000 in annual sales. He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order. In evaluating the possible adoption of a computerized accounting system, Diego will probably discover that

Revenue, minus cost of goods sold =

A ________ is a specialized accounting book, where transactions are categorized according to type. For example, all utility transactions are recorded in the same category.

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision making.

The books where accounting data are first entered are called ledgers.

A firm's ________ reports the profit or loss for the firm over a specified time period.

Both the current ratio and the acid-test ratio are liquidity ratios.

Today's computerized accounting programs are

The current ratio is a type of ________ ratio.

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

Financial accounting involves activities such as preparing budgets and measuring production costs.