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Exam 17: Understanding Accounting and Financial Information

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Question 131

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The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

A) True
B) False

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Question 132

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Accounting provides information about the financial condition and operating performance of a firm.

A) True
B) False

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Question 133

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Inputs to the accounting system include sales documents.

Accountants not only provide financial information to the firm,they:

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

Explain the meaning of the fundamental accounting equation and its relation to the Balance Sheet.If it is helpful,create an example using numbers.

A bookkeeper's first task is to:

________ is the monetary value that is received for goods sold,services rendered and money received from other sources.

In calculating cost of goods sold,Meg Malloy noticed that her accounting software included the freight charges on purchased goods.Your response to this procedure is:

The total cost of goods sold reported on an income statement is not affected by the inventory valuation method the firm uses.

Derek has a bachelor's degree in accounting and additional training in tax law.He is responsible for preparing tax returns and developing tax strategies for his employer,and has done so for the past seven years.Derek is a certified government accountant.

________ measures the amount of profit earned by a company for each share of outstanding common stock.

The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Marshall McBride inherited $10,000 from his Great Aunt Martha.He invested $5,000 in a new start-up venture,10^th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Yesterday,he gathered the following information from the financial statements of these companies At this time,Marshall's return on equity is:

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Gross profit represents profit after the deduction of cost of goods sold,and before the deduction of all other selling expenses,general expenses,and tax expense.

Because each business is unique,the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

The balance sheet is composed of the following types of accounts:

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.