Deck 8: Financial Statements: The Scorecard

Question 1

The basic financial statements an owner-manager needs to be familiar with are the balance sheet and the income statement.

Answer 1

True

Question 2

A balance sheet is a financial statement that reports a business's ongoing average financial position.

Answer 2

False

Question 3

Liabilities are generally divided into two categories: short term and long term.

Answer 3

True

Question 4

Owners' equity is equivalent to a firm's as¬sets.

Question 5

Inventory is typically regarded as a fixed asset.

Question 6

Income statements always cover a one-year interval.

Question 7

While most income statements cover a one-year interval, it is not uncommon to find monthly, quarterly, or semiannual income statements.Net income is the excess of revenue over expenses during the particular period under discussion.

Question 8

Operating expenses are generally divided into Selling Expenses and Administrative Expenses.

Question 9

Assets = Liabilities + Owner's Equity

Question 10

In accounting terms, a debit indicates an increase in a liability account and a decrease in an asset (or income) account.

Question 11

The Sales and Cash Receipts Journal is a record of expenditures of funds by the new venture.

Question 12

In order to determine the value of an asset, the owner-manager must do which of the following?

A) Identify the resource
B) Provide a monetary measurement value of that resource's value
C) Establish the degree of ownership in the resource
D) All of the above

Question 13

Cash, land, and equipment are examples of:

A) Tangible assets
B) Intangible assets
C) Current liabilities
D) Long-term liabilities

Question 14

Copyrights and patents are regarded as:

A) Tangible assets
B) Intangible assets
C) Intellectual assets
D) Temporary assets

Question 15

Claims of the business against its customers for unpaid bal?ances from the sale of merchandise or the performance of services are recorded on the Balance Sheet as:

A) Bills
B) Credit charges
C) Accounts payable
D) Accounts receivable

Question 16

Expenses that the firm has already paid for but has not yet used are known as:

A) Prepaid expenses
B) Prepaid assets
C) Accounts receivable
D) Notes payable

Question 17

Obligations that will become due and payable during the next year or within the operating cycle are know as:

A) Long-term liabilities
B) Current liabilities
C) Credit liabilities
D) Accounts payable

Question 18

Liabilities incurred when goods or supplies are purchased on credit are know as:

A) Accounts payable
B) Liabilities payable
C) Trade credits
D) Accounts receivable

Question 19

Obligations that will not become due or payable for at least one year or not within the current operating cycle are known as:

A) Short-term liabilities
B) Accounts payable
C) Accounts receivable
D) Long-term liabilities

Question 20

Preferred stock differs from common stock in that its holders have ____________________.

A) Preference to the assets of the firm in case of dissolution.
B) Greater value per share.
C) Entitlement to two votes per share, rather than one.
D) All of the above

Question 21

The accumulated net income over the life of a corporation (to date) are known as:

A) Retained earnings
B) Net profits
C) Net earnings
D) Lifetime income

Question 22

The _______________ is a financial statement that shows the change that has occurred in a firm's position as a result of its operations over a specific period.

A) Balance Sheet
B) Statement of Owner's Equity
C) Income Statement
D) Position Statement

Question 23

The income statement can be reduced to three primary categories. Which of the following is NOT one of them?

A) Revenue
B) Net Income
C) Shareholder's Equity
D) Expenses

Question 24

Which of these is followed by U.S. as a nationwide accounting standard?

A) Generally Accepted Accounting Principles (GAAP)
B) International Financial Reporting Standards (IFRS)
C) Both A & B
D) None of the above

Question 25

Estimated Income Tax is found on which financial statement?

A) Balance Sheet
B) Income Statement
C) Statement of Owner's Equity
D) None of the above

Question 26

_____________ are/is the gross sales of a business during a period of time.

A) Profits
B) Revenues
C) Net profit
D) Net income

Question 27

When cost of goods sold (COGS) is subtracted from net sales, the result is the _________.

A) Net income
B) Net profit
C) Gross Margin
D) Gross profit

Question 28

Which of the following are the two most basic accounting record keeping tools? (Select 2)

A) Sales and Cash Receipts Journal
B) Cash Dis?bursement, Purchases, and Expense Journal
C) Cashier's Ledger
D) Cash Receipts, Purchases, and Assets Journal

Question 29

Which of the following is a common early warning sign of financial trouble?

A) Needing to use credit
B) Regular turnover of inventory
C) Declining profits despite increased sales
D) All of the above

Question 30

Which of the following is NOT a common early warning sign of financial trouble

A) Continual stretching of accounts receivable
B) Growing write-offs of uncollectible receivables
C) Increasing payables in relation to revenues
D) Decreasing interest expenses in relation to sales

Question 31

The best rated accounting software for Small Business Overall is:

A) Wave Accounting
B) Zoho Books
C) Intuit QuickBooks Online
D) Freshbooks

Question 32

Why does the balance sheet always balance? Please provide examples to illustrate how this works.

Question 33

Briefly explain how a business owner benefits from keeping accurate accounting records.

Question 34

What is depreciation and how is it generally applied?

Question 35

Explain how a business accounts for customers who do not pay for the goods or services they have received.

Question 36

What are current liabilities as reflected on a balance sheet, explain the most common current liabilities?