Exam 17: Understanding Accounting and Financial Information

As Hector was packing to return to State University after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a stereo system, and a DVD player. An accountant would list all of these as Hector's:

CPA Experts, Inc., a well-known public accounting firm has enjoyed a long-standing relationship with one of its clients, Generation Technologies, Inc. Recently, at a company-wide gala, the CEO of Generation Technologies announced that CPA Experts has performed the firm's independent audits for the past ten years, and he is looking forward to exploring other services that CPA Experts has to offer, including financial consulting. "After all," he exclaims, "A recent magazine article called CPA Experts the 'profitability geniuses '!" As a senior accountant for Generation Technologies, how do you advise your CEO?

Expenses a firm incurs for insurance, office salaries, and rent are classified as:

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

In order to calculate the current ratio for your firm, you divide the total value of current assets by:

The accounting book that provides all the information about a single account in one place is called the ledger.

A business manager who keeps his/her customers satisfied can be successful without having a great deal of knowledge about accounting practices.

Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. Cindy is concerned with:

Which of the following items is found on an income statement?

If prices of inventory are unchanged throughout the year, LIFO and FIFO inventory valuation methods will produce the same reported net income.

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

Leverage ratios are concerned with the extent to which a firm relies on borrowed funds in its operations.

If the goal of a business is to pay lower taxes on its income during an inflationary period, it is likely to use the FIFO inventory costing method.

April works in the accounting department at Henson's Tire & Auto. She is concerned that the company has been placing too many orders for office supplies and wants to look at all of the transactions involving the purchase of office supplies for the past several months. April can find such information by looking at the supplies account in the:

The equipment a firm owns and the money it has in its bank account are considered assets.

Patents and copyrights are classified as on the Balance Sheet.

Meg Malloy is running an income statement on her QuickBooks™ computer accounting program. Which of the following accounts will be used to calculate gross profit?

When Bark Three Times Pet Store sells inventory, the value of the cost of goods sold reported on the income statement will depend on which inventory valuation method it uses.

An accountant who has a bachelor's degree, two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

refers to the difference between cash coming into the firm and cash leaving the firm.