Exam 12: The Role of Accounting in Business

_____ are principles for financial reporting established by an independent agency called the Financial Accounting Standards Board.

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

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

_____ analysis allows a business to determine the level of sales that it must reach to avoid losing money.

A _____ is a company that makes a profit by selling goods.

Accounting consists of measuring and summarizing business activities.

Your _____ shows the amount of cash that you have coming in and going out.

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

_____ analysis expresses each item on the income statement as a percentage of a specified base (usually sales).

Accountants find the money that a company needs to operate.

Long-term assets such as cars are also called fixed assets.

_____ is the selling price per unit minus the variable cost per unit.

Its _____ ratio examines the relationship between funds acquired from creditors and funds invested by owners.

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

Often called management or corporate accountants, _____ accountants work either for a single company or government agency.

Under accrual accounting, accounts receivable are recorded when sales are made and accounts payable when payments have been received.

_____ is/are the resources from which a company expects to gain some future benefit.

Bakersfield, Smith, and Babble LLC is a midsized accounting firm in New England. In order to project an image as a full service company, each partner specializes in a different field of accounting. Bakersfield provides information and analysis to business owners in order to help them operate their companies. Smith’s job is to furnish information to individuals and groups both inside and outside organizations to help them assess their firms’ financial performances. Babble is primarily responsible for preparing financial statements for business owners, managers, and investors and other users, such as creditors and government agencies. -Government agencies would have little interest in the kind of information supplied by this firm.

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

Firms that provide clients with accounting and tax services are called _____ accounting firms.