Exam 12: The Role of Accounting in Business

The system that requires an accountant to record a transaction when it occurs is called immediate accounting.

If you buy something with the intent to pay later rather than in cash, the seller will set up an account _____.

What two items does an income statement show?

_____ activities create cash inflows or outflows through the selling or buying of long-term assets.

Last year, Rebecca's Bookstore had $1 million in sales.She spent $590,000 to buy the books that she sold and paid out $300,000 in operating expenses.Interest and taxes came to $3,000.How much profit did Rebecca have for each $1.00 in sales?

Your statement of cash flows shows how much cash you have coming in and going out.

Accounting is often called "the language of business."

In order to examine a firm's capital structure, you would look at its debt debt-to-equity ratio.

Scenario-Based Brenda Sinatra is senior analyst at a major Oregon accounting firm.One facet of her job is determining how much of each sales dollar is left after a client has covered certain costs.She's also responsible for calculating how efficiently a client company's assets are being managed.Another aspect of her job calls for measuring overall company performance and determining how effectively management is running the company.Finally, she reports on the firm's financial strength to its board of directors. -The first part of Brenda's job requires her to deal with management efficiency ratios.

To calculate a firm's current ratio, you divide its current assets divided by its _____.

Its _____ ratio indicates that a company is making a reasonable profit on its sales even though its profitability is declining.

Brenda probably deals with gross profit margin ratios but not with net profit margin ratios.

All of the following appear in the financial statements prepared by accountants _____.

Companies that manufacture goods and hold onto them for a while before selling them and companies that buy goods and hold them temporarily for resale have created ______.

Interest coverage measures the number of times that a firm's operating income can cover its interest expense.

The principle of _____ explains that a company makes money when it sells inventory and that the faster it sells it, the more money it makes.

_____ is the difference between a company's revenues and all of its expenses.

A company's balance sheet reports its owner's equity.

Its _____ ratio will measure overall company performance and tell you how successful management is at running the business.

In September, Sherry's Shoe Mart ordered women's boots from a supplier.The boots were delivered in October, paid for in November, and sold in December.If Sherry uses accrual-based accounting, in which month should she report the boots under Cost of goods sold?