Deck 15: Using Accounting Information

Question 1

Today corporations are required to send their stockholders an annual report.Assume that you are a prospective investor trying to decide if you should invest in a specific corporation.What type of information is contained in an annual report that would help you decide if this is the right investment for you?

Answer 1

Answer not provided.

Question 2

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross.Which of the following represents a key component of the Sarbanes-Oxley Act relating to consulting services?

A) A public corporation must change its lead consulting firm every five years.
B) Accounting firms are prohibited from providing many types of nonaudit consulting services to the companies they audit.
C) Accounting firms who report violations of the Sarbanes-Oxley Act must be banned from consulting for five years.
D) The SEC is required to establish a full-time five-member federal oversight board that will police the consulting industry.
E) Consultants must maintain financial documents and audit work papers for fifteen years.

Answer 2

B

Question 3

What is a profitability ratio? What is a short-term financial ratio? Why are these ratios important?

Answer 3

Answer not provided.

Question 4

What are the differences between managerial accounting and financial accounting? From a career standpoint, which type do you prefer and why?

Question 5

Define a balance sheet (also called a statement of financial position).

Question 6

Why would managers, lenders, and investors compare current financial statements with those prepared for past accounting periods?

Question 7

What is the accounts receivable turnover? What is an inventory turnover? Why are these important ratios for a manager to track?

Question 8

The primary users of accounting information are managers.What other groups outside the organization may use accounting information about a firm?

Question 9

What does it mean to post a transaction? Would this part of the accounting cycle be done before or after preparing a trial balance?

Question 10

Describe the employment trends for accountants, auditors, and managers in the accounting profession between now and the year 2016.Then describe what skills employees must have in order to be successful in the accounting profession.

Question 11

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross.What does GAAP stand for?

A) generally accepted accounting principles
B) generally accepted auditing principles
C) generalized accounting and auditing principles
D) generic accounting alternative practices
E) general administrative accounting practices

Question 12

How would it be easier to determine if a firm made or lost money last year-by looking at the balance sheet or by looking at the income statement? Support your answer by explaining in general terms what accounts a balance sheet lists and what accounts an income statement lists.

Question 13

What type of information is reported on a corporation's statement of cash flows?

Question 14

In what ways does the Sarbanes-Oxley Act improve the validity of the information provided by a firm's accounting system?

Question 15

Why are current assets listed before fixed assets on the balance sheet?

Question 16

What types of accounts might be listed on a firm's income statement? What would be the term for the dollar amount left at the bottom of the income statement?

Question 17

Managers and other groups interested in a business firm's financial records must be able to "trust the numbers." Unfortunately, a large number of accounting scandals have caused people to doubt the numbers.Why do you think corporate executives "cook" their company's books?

Question 18

Write the accounting equation.Then define each term and give an example.

Question 19

Explain why a firm's financial statements should be audited.

Question 20

List the five steps in a typical accounting cycle.Then explain why each step is important.

Question 21

Which of the following statements about the Sarbanes-Oxley Act is incorrect?

A) The act was passed in 1996.
B) Because the act is complex, compliance is more expensive and time consuming for corporate management.
C) Because of the act, the SEC was required to establish a federal oversight board.
D) Because of the act, a corporation's chief executive and financial officers must certify financial reports.
E) The act strengthened the penalty for destroying financial documents related to an audit.

Question 22

A public corporation must change its lead auditing firm

A) every year.
B) every two years.
C) every five years.
D) every ten years.
E) whenever it wants to.

Question 23

The purpose of an audit is to ensure that financial statements have been prepared according to

A) the particular company's standards.
B) the industry's standards.
C) generally accepted accounting principles.
D) international accounting standards.
E) the standards of certified public accountants.

Question 24

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job.To help the owners understand how effectively the firm is transforming sales into profits, Christine should address which of the following ratios?

A) return on sales
B) earnings per share
C) acid-test ratio
D) return of owners' equity
E) inventory turnover

Question 25

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
The process of systematically collecting, analyzing, and reporting financial information is called _____.

A) accounting
B) bookkeeping
C) auditing
D) journalizing
E) revenues

Question 26

Because of the Sarbanes-Oxley Act, accountants must maintain financial documents and audit work for _____.

A) six months
B) one year
C) three years
D) five years
E) ten years

Question 27

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job.If the owners did not recognize the term "statement of financial position," Christine could use which of the following more common terms?

A) income statement
B) balance sheet
C) statement of cash flow
D) statement of retained earnings
E) statement of financial ratios

Question 28

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.

-Refer to Ridgley, Cooper, and Ross.If you applied for a job at RCR and were asked to state the accounting equation, which of these would you state?

A) Assets = liabilities -owners' equity
B) Assets + liabilities = owners' equity
C) Assets /liabilities = owners' equity
D) Assets = liabilities + owners' equity
E) Assets = liabilities * owners' equity

Question 29

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.

-Refer to Ridgley, Cooper, and Ross.In order to be successful in the accounting industry, RCR employees must

A) know all areas of accounting and marketing.
B) have complete human resources training.
C) be able to communicate in multiple languages.
D) know how to do accounting the old fashioned way-using the manual, double-entry system.
E) have a strong background in financial management.

Question 30

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job.When Christine explained the asset side of the statement, she included which of the following?

A) retained earnings
B) notes payable
C) merchandise inventory
D) long-term liabilities
E) stockholders' equity

Question 31

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job.If the owners were interested in obtaining their working capital figures, Christine should do which of the following?

A) divide current assets by current liabilities
B) multiply current assets by current liabilities
C) divide net income after taxes by net sales
D) get the difference between current assets and current liabilities
E) subtract inventory from current assets

Question 32

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm.RCR offers services in most areas of accounting, including auditing and consulting services.The firm must follow the GAAP rules, just like any other accounting firm.If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act.Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations.Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross.One of RCR's clients is ABC Electronics.RCR develops ABC Electronics' statements and reports for ABC's stockholders, financial analysts, and bankers.These services can be classified as which of the following?

A) non-accounting services
B) tax accounting
C) financial accounting
D) managerial accounting
E) cost accounting

Question 33

When Nathan applied for a loan to expand his sailboat business, the bank required that his financial statements be carefully examined by a CPA.The bank is requiring Nathan to have his financial statements _____.

A) verified
B) audited
C) affirmed
D) certified
E) insured

Question 34

The president of Universal Foods Corporation is seeking your advice on the kinds of information provided by an accounting system that would be helpful to her.Since the president is developing a new, company-wide strategy, she would be most interested in the

A) performance appraisals of employees in one of the three customer service centers.
B) total sales for all of the company's products.
C) sales for one of the company's products.
D) payroll figures for employees at one of the ten warehouse facilities.
E) lists of primary and secondary suppliers for one of the five production plants.

Question 35

After the Sarbanes-Oxley Act was signed by the president, auditors and accountants can be imprisoned for up to ____ years for destroying financial documents and willful violations of the securities laws.

A) fifty
B) thirty
C) twenty
D) ten
E) five

Question 36

When Joan Newport attended the orientation for new employees in the accounting department at Madison Oil and Energy Exploration, she was told that the primary users of accounting information are _____.

A) investors
B) managers
C) lenders
D) suppliers
E) government agencies

Question 37

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job.When Christine explained the steps in the accounting cycle, she identified which of the following as the first step in the accounting cycle?

A) analyzing the source documents
B) preparing financial statements
C) posting
D) preparing the trial balance
E) recording

Question 38

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam.She recently interviewed with a relatively small and new company and was offered a job.The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges.Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.When she talked about the statement of financial position, they had no idea what she was talking about.She was the qualified individual responsible for accounting.No one else working with her had much knowledge.They did not even know the different financial ratios that someone could use to understand the financial standing of a company.Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
From an executive's viewpoint, which of the following statements does not describe an executive's motivation to "cook" a firm's books?

A) the desire to look good in the local newspapers or financial publications
B) the desire to impress Wall Street analysts
C) the desire to impress the firm's investors
D) the desire to be ethical
E) the desire to inflate the company's stock value

Question 39

Which of the following statements is false?

A) When the SEC began to look for accounting irregularities, Andersen employees shredded documents.
B) The accounting firm of Arthur Andersen was convicted of obstruction of justice.
C) Less than a month after admitting accounting errors, Enron filed for bankruptcy.
D) Enron inflated earnings by almost $600 million.
E) To date, Arthur Andersen is the only major accounting firm that has been targeted by trial lawyers, government regulators, and the IRS for providing questionable audit work for major corporations.

Question 40

An audit is

A) performed by the firm's private bookkeepers.
B) not necessary if the firm used generally accepted bookkeeping procedures.
C) required by many bankers and lenders who are trying to validate a firm's accounting statements.
D) a waste of the firm's resources.
E) a guarantee that a firm hasn't "cooked" the books.

Question 41

Regina owns and operates her own bakery and coffee shop.Regina has no accounting training and has only three employees.How does she most likely handle the necessary accounting for her business?

A) She does it herself because it takes little training or knowledge.
B) She hires a private accountant to work for her and take care of the accounting functions.
C) She has one of her part-time chefs do the accounting when he has time.
D) She pays a public accountant to do the accounting for her business.
E) She does nothing at all, because accounting is not necessary for businesses.

Question 42

If total liabilities were subtracted from total assets, the residual value would be _____.

A) revenues
B) owners' equity
C) net income
D) working capital
E) expenses

Question 43

A type of exam that emphasizes not only accounting but also decision-making and critical-thinking skills is the _____.

A) certified management accounting exam
B) certified critical thinking exam
C) decision-support management exam
D) certified financial planner exam
E) critical-thinking exam

Question 44

The resources owned by David's Spa and Salon total $148,000.The total amount of debt that it owes to others is $87,000.Which of the following is correct?

A) David's owners' equity is $87,000.
B) The owners' equity in David's is $61,000.
C) David's liabilities are $148,000.
D) The firm's liabilities are $61,000.
E) The firm has more owners' equity than liabilities.

Question 45

An airplane that FedEx owns and uses to deliver packages is a(n) ____ of FedEx.

A) liability
B) asset
C) owners' equity
D) expense
E) revenue

Question 46

All of the following except which are acceptable ways of stating the accounting equation?

A) owners' equity = assets - liabilities.
B) assets = liabilities + owners' equity.
C) owners' equity - liabilities = assets.
D) assets - liabilities = owners' equity.
E) assets = shareholders' equity + liabilities.

Question 47

According to the accountant for Michael's Floral Supply, the firm's assets are $124,000 and its liabilities are $31,000.Which of the following statements is correct?

A) The owners' equity is $155,000.
B) The owners' equity is $93,000.
C) The firm's current assets are $62,000.
D) The firm's current liabilities are $24,000.
E) The firm's accounting equation won't balance.

Question 48

People who purchased stock in Morgan Oil Exploration are most interested in its ____ reports.

A) managerial accounting
B) schedule of assets
C) tax accounting
D) financial accounting
E) cost accounting

Question 49

Victor Cooper spent five years in an accounting educational program and completed a rigorous accounting examination five years ago.Since then, he has worked for several accounting firms.Currently he is a senior partner in a huge international accounting firm.By profession, Victor is probably a_____.

A) bookkeeper
B) certified public accountant
C) marketing manager
D) vice president of finance
E) private accountant

Question 50

The information provided by managerial accounting is of most benefit to a firm's _____.

A) investors
B) creditors
C) managers
D) lenders
E) bankers

Question 51

External groups that require information on a firm's financial condition before they will commit themselves to either short-term or long-term loans are known as _____.

A) stockholders
B) owners
C) lenders
D) proprietors
E) auditors

Question 52

Chase invests $5,000 of his own money in his new auto detailing business.He then obtains a loan and builds a small workshop in his backyard for $10,000.At this point assets are ____, liabilities are ____, and owners' equity is ____.

A) $10,000; $5,000; $15,000
B) $15,000; $10,000; $5,000
C) $5,000; $0; $5,000
D) $15,000; $10,000; $0
E) $10,000; $5,000; $5,000

Question 53

Which of the following is true about CPAs?

A) Almost everyone who does accounting work is a CPA.
B) CPA standards are the same in every state.
C) CPAs must participate in continuing education programs.
D) Once an individual has become a CPA, no further work is necessary to retain the certification.
E) The portions of the CPA examination are costing, taxing, budgeting, and billing.

Question 54

Ebony Jones is hired by Ruby Tuesday to help with budgeting, determining the costs of the firm's meal services, and recording transactions and creating financial statements.Ebony is a _____.

A) private accountant
B) budget manager
C) public accountant
D) clerk
E) public auditor

Question 55

Clockwise, Inc., wants to design an entire system for providing accurate financial information.Who will provide this service?

A) its accountant
B) the state controller
C) the Internal Revenue Service
D) the state attorney general
E) its bookkeeper

Question 56

If the assets of Martin's Pet Store are $107,000 and the owners' equity is $75,000, which of the following is a correct statement?

A) The owners' investment equals $182,000.
B) The current assets are worth $32,000.
C) The new income for the period is $32,000.
D) The long-term liabilities are $75,000.
E) The liabilities are $32,000.

Question 57

Information that is not divulged to anyone outside the business is commonly referred to as ____ information.

A) summary
B) proprietary
C) financial
D) investors'
E) tax

Question 58

A sheet-metal manufacturer is interested in the financial statements of General Motors because, as a(n) ____, the metal manufacturer will provide sheet metal to General Motors for further processing.The sheet metal manufacturer is concerned with establishing its credit policies for General Motors.

A) supplier
B) lender
C) investor
D) accountant
E) customer

Question 59

Ernst & Young, KPMG, and PricewaterhouseCoopers are all

A) private accounting firms.
B) financial intermediaries.
C) government accounting agencies.
D) management consultants.
E) public accounting firms.

Question 60

In order for The Gift Market, a local specialty store, to purchase Christmas merchandise for selling in its store, it had to borrow money from a local bank.This debt owed to the bank is a(n) _____.

A) liability
B) expense
C) owners' equity
D) asset
E) credit

Question 61

If the liabilities of a business are $85,000 and the owners' equity is $110,000, which of the following is a correct statement?

A) Assets equal $25,000.
B) Assets equal $195,000.
C) Assets equal $110,000.
D) Assets equal $85,000.
E) It is impossible to determine the value of the assets.

Question 62

The process of transferring information from a general journal to a general ledger is referred to as _____.

A) posting
B) transposing
C) recording
D) debiting
E) journalizing

Question 63

Which of the following presents assets in the correct balance sheet order?

A) cash, land, accounts receivable, equipment
B) marketable securities, equipment, prepaid insurance, inventory
C) cash, inventory, equipment
D) accounts receivable, buildings, inventory, land
E) buildings, prepaid expenses, inventory, equipment

Question 64

The term ____ describes assets that can be quickly converted into cash or consumed in one year or less.

A) expenses
B) overhead costs
C) current assets
D) acid-test assets
E) fixed assets

Question 65

The balance sheet is composed of

A) owners' equity, assets, and liabilities.
B) expenses, revenue, and net income.
C) revenue, expenses, and owners' equity.
D) assets, expenses, and net income.
E) assets, liabilities, and revenues.

Question 66

Tom has successfully completed the first three steps in the typical accounting cycle.However, because the ____ totals are incorrect, Tom cannot proceed to prepare the financial statements.

A) analysis
B) posting
C) general journal
D) ledger
E) trial balance

Question 67

The trial balance is the

A) calculation of the net income.
B) verification that the firm earned a profit.
C) process of transferring journal entries to the general ledger.
D) summary of the information for the month.
E) summary of the firm's general ledger accounts at the end of the accounting period.

Question 68

The ease with which an asset can be converted into cash is referred to as its _____.

A) liquidity
B) profitability
C) solvency
D) convertibility
E) capitalization capacity

Question 69

Brian has to collect and organize his company's receipts, invoices, and sales slips that show the business's daily transactions.These are all considered ____ in accounting.

A) postings
B) source documents
C) general ledgers
D) specialized ledgers
E) trial balances

Question 70

Another name for the statement of financial position is the _____.

A) income statement
B) statement of owners' equity
C) earnings statement
D) statement of changes
E) balance sheet

Question 71

The Cheese Shoppe's liabilities total $59,000 and its owners' equity is $124,000.Which of the following is true?

A) The total assets equal $65,000.
B) The firm's assets are $124,000.
C) The current liabilities are less than the current assets.
D) The total assets equal $183,000.
E) The firm's sales are $183,000.

Question 72

Sarah has just completed journalizing the day's entries in the general journal for her housecleaning business.The next step she must take in the accounting cycle will be

A) posting the journal entries to the ledger.
B) analyzing the day's transactions.
C) making adjustments in the journal.
D) preparing a trial balance.
E) closing the books and preparing financial statements.

Question 73

____ is the process of recording financial transactions in a general journal.

A) Recording
B) Transcribing
C) Entering
D) Journalizing
E) Posting

Question 74

If a company has $50,000 of assets, which of the following could be true?

A) It has -$50,000 in stockholders' equity and $100,000 in liabilities.
B) The company has fewer assets than it does liabilities.
C) It has $30,000 in liabilities and $80,000 in owners' equity.
D) The company has more owners' equity than assets.
E) It has $23,000 in owners' equity and $27,000 in liabilities.

Question 75

After Jocelyn, a public accountant, prepares and checks the financial statements for one of her clients, she then

A) sends the bill to her client because everything is complete.
B) prepares a trial balance to ensure the statements are accurate.
C) closes the books and prepares a post-closing balance.
D) begins the next period of accounting records.
E) determines whether or not a post-closing trial balance is necessary.

Question 76

Jack Stanley graduated from college and obtained a full-time job in accounting.At the end of his first year of employment, his assets totaled $9,000.His liabilities totaled $3,000.His ____ was $6,000.

A) asset total
B) profit
C) net worth
D) cost of living
E) allocated total

Question 77

Cash, marketable securities, notes receivable, and merchandise inventory are examples of _____.

A) current assets
B) expenses
C) acid-test assets
D) fixed assets
E) overhead costs

Question 78

A book of original entry is called the _____.

A) source document
B) general journal
C) statement of financial position
D) income statement
E) general ledger

Question 79

The most liquid asset is _____.

A) sales
B) accounts receivable
C) marketable securities
D) cash
E) capital

Question 80

Richard Samonski does not understand the significance of the accounting equation.You explain its importance in the simplest way by saying that:

A) as a result of each transaction, the total assets should equal the total liabilities plus owners' equity.
B) as a result of most of the transactions, assets and liabilities are equal.
C) owners' equity is not as important as assets and liabilities.
D) it is just an exercise in accounting.
E) as a result of each transaction, total liabilities should equal total assets plus owners' equity.