Exam 17: Understanding Accounting and Financial Information

One of the key financial statements prepared in the fifth step of the accounting cycle is:

All firms with more than four employees should have a full-time accountant.

Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ________ ratios.

Juliet has found that her small business needs a better way to maintain accounting records and analyze business opportunities.Currently,she uses a manual accounting system.These days,any off-the-shelf accounting package available at a local software retailer should do an excellent job of meeting her firm's accounting needs.

Mini-Case Minnie A.Wright-Hoff works as an accountant for Double Entry Doors,Inc.Her company sells and installs oversized garage doors needed by large vehicles.Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments,and by identifying areas where departments are exceeding their budgets.However,as one of only three accountants employed by Double Entry Doors,Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments.For example,she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced.Her efforts revealed no problems,so she is now ready to start working on the firm's financial statements.Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report.She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The fact that Minnie spends most of her time measuring costs and checking to see if departments are staying within their budgets suggests that she is often involved in:

The statement of cash flows shows a firm's revenues,costs of goods sold,expenses,and net income.

The accounting profession is divided into 5 key working areas,two of which are:

Mike is the head of the accounting department at Micro flash.After completing the trial balance,he will proceed with the preparation of the balance sheet,the income statement and the statement of cash flows.

Miko is preparing her homework for her accounting class.She is uncertain as to the proper handling of patents and copyrights on a firm's financial statements.Which of the following is correct?

The debt to owners' equity ratio is a common type of liquidity ratio.

The Barkley Company has several automobiles that are used in the business.Recently,the owners were told that even though the government permits the firm to depreciate the vehicles,it is not a deductible expense on the income statement.

Cash revenues from the sale of new cars at Pete's Auto Emporium would be listed as a cash inflow from operations on Pete's statement of cash flows.

One of the statements prepared in the accounting cycle is the statement of cash flows.

The __________ is an accounting statement that reports the financial condition of a firm at a specific point in time.

The __________ sets accounting standards used in government accounting.

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Keith will graduate from Southern State University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Potential investors are interested in both a firm's balance sheet and income statement when evaluating whether or not to invest in a firm.

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?

The _____ shows the assets,liabilities,and owners' equity of a firm,at a specific point in time.