Exam 12: The Role of Accounting in Business

Its statement of cash flows tells a business only where its cash was spent.

The Sarbanes-Oxley Act allows accountants to serve the same clients as both auditors and consultants.

Gross profit is the money that a company has earned after paying all its expenses.

The current ratio shows the relationship between a company's current assets and its current liability.

To help them operate the business, _____ accounting provides information and analysis to decision makers inside the organization.

Its _____ ratio shows how efficiently a company sells its average stock of goods on hand in one year.

_____ shows when your total sales revenues exactly equal your expenses.

A firm can measure its overall performance and find out how successfully it's being run by analyzing its _____ ratio.

Financial condition ratios tell you how efficiently your assets are being managed.

If you were asked to identify "the language of business," you should reply: _____.

Businesses that sell services rather than merchandise don't have a line for _____ on their statements.

When a business needs a more sophisticated balance sheet than the one created for its first accounting records, it creates a _____ balance sheet to list assets and liabilities in separate categories.

Define gross profit and net income.

Management effectiveness ratios measure overall company performance and show how successfully management is at running the business.

A current loan is due in two years.

The annual allocation of the cost of a long-term asset is recorded as a(n) _____.

What do management effectiveness ratios tell a business?

The inventory yield ratio measures a firm's efficiency in selling its inventory.

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. -Given the nature of their firm, none of these accountants would have much daily use for GAAP (generally accepted accounting principles).

_____ costs don't vary with quantity of goods sold.