Exam 11: Understanding Accounting

Bookkeeping is a comprehensive system for collecting, analyzing, and communicating financial information.

At the end of the fiscal year for Santos Industrial Machinery, management raised concerns about the company's financial performance. The company's accountants have been asked to analyze the current financial state of the company by using ratio analysis. Santos's executives are most interested in seeing the company's short-term solvency ratios. Based on this information, what question do they most likely want to have answered? Can the company pay its immediate debts without obtaining further loans? Does the company have enough inventory to meet sales demands? How much inventory on hand does Santos have? How much bonds payable debt is Santos carrying? Is the company selling products at an appropriate price?

What is the difference between current and long-term liabilities?

What is the purpose of computing the current ratio? To provide investors with some measurement of the returns they can expect from their investment To measure the extent to which a firm is financed through borrowed money To measure how much cash the firm has To measure the firm's ability to meet emergency demands for cash To measure the firm's ability to meet its current obligations out of its current assets

What is the difference between financial accounting and managerial accounting?

The controller is a company's chief accounting officer.

A current asset is an expense, such as rent, that is paid before the upcoming period in which it is due. a nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit. an amount due from a customer who has purchased goods on credit. an asset with long-term use or value, such as land, buildings, and equipment. an asset that can or will be converted to cash within the following year.

Martin is a salaried accountant who has been hired by Lexar Corp. to carry out its day-to-day financial activities. Martin is a(n) public accountant. auditor. controller. private accountant. advisor.

What happens to assets, liabilities, and owners' equity when a company is operating profitably?

Employees and unions use accounting information to plan for tax inflows. to set goals, develop plans, set budgets, and evaluate future prospects. to estimate returns. to decide if the company is a good credit risk. to plan for benefits.

Intangible assets include patents, trademarks, and copyrights.

Which of the following is an intangible asset? An inventory level of 1000 copies of a book The copyright for a textbook A printing press used in the publication of a book A $1000 Canada Savings Bond The building in which a book was printed

What is the formula for inventory turnover?

The field of accounting that serves internal users of a company's financial information is financial accounting. auditing. public accounting. bookkeeping. managerial accounting.

Sheena is a private accountant who is working through the accounting cycle. She has completed transferring entries from the journal to a ledger. Her next step is to record transactions in a journal. do a trial balance. prepare financial statements. analyze the financial statements using ratio analysis. transfer entries from the journal to the ledger.

Operating income is determined by subtracting from gross sales revenue the cost of goods sold, operating expenses, and income taxes.

How are international accounting standards relevant for Canadian companies and Canadian accounting activities?

What is the purpose of computing profitability ratios? To determine liquidity To determine the most efficient use of resources To determine the liquidity of the firm To determine the potential risk of business activity To determine the potential returns investors can expect

Certified management accountants focus more on strategic management, while chartered accountants emphasize external financial reporting.

Kershner says: "Our income statement should be looking good this year. We've been doing excellent business this year, so we have a lot of gross sales. The company should be in good shape." Michaels replies: "It remains to be seen how our income statement will look overall. In spite of strong sales revenue, the overall income statement might not be as good as we might hope." Which of the following, if true, would strengthen Michaels's argument? The company's gross sales went up from the previous year. Total operating expenses were high in the current year. The company has only one part-time accountant. There were few sales returns in the current year. Offshoring allowed the company to trim administrative salaries by 25 percent.