Question 1

The difference between your sales and your cost of goods sold is known as your _____.

Accepted Answer

The difference between sales and cost of goods sold is known as gross profit or gross margin. It represents the amount of money left over after direct expenses have been deducted from revenue. This is different from net profit, which takes all expenses into account. Cost of doing business and owner's equity are not the correct terms to describe this difference.

Question 2

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

Accepted Answer

Contribution margin per unit is the amount of money that contributes to covering fixed costs and generating profit from each unit sold. It is calculated by subtracting the variable cost per unit from the selling price per unit.

Question 3

Accounting can help your business in all of the following ways except:

Accepted Answer

Accounting does not "legalize" your financial records. However, accurate and organized accounting records can help ensure compliance with legal and regulatory requirements for financial reporting.

Question 4

_____ costs vary with quantity of goods sold but remain constant on a perunit basis.

Accepted Answer

Variable costs increase or decrease based on the quantity of goods sold, but the cost per unit remains the same.

Question 5

This past year Donald's Duck Farm had revenues of $25,000. The company spent $1,000 per month on duck eggs and $700 per month on feed, rent, and utilities to keep incubators running. What was Donald's net income

Accepted Answer

The first step is to calculate the total expenses for the year:

$1,000 per month for duck eggs = $12,000 
$700 per month for feed, rent, and utilities = $8,400 
Total expenses = $12,000 + $8,400 = $20,400

Next, we can calculate the net income by subtracting the total expenses from the revenues:

Net income = $25,000 - $20,400 = $4,600

Therefore, the correct answer is C ($4,600).

Question 6

Your _____ shows organizational sales, expenses, and profit.

Accepted Answer

An income statement shows the sales or revenue generated by a business, the expenses incurred in generating that revenue, and any profit or loss realized over a specified period of time. A balance sheet, on the other hand, shows a company's assets, liabilities, and equity at a specific point in time. A statement of cash flows shows how cash has flowed in and out of a business during a specific period of time, and a returns summary is not a standard financial statement.

Question 7

You're reading an article entitled _____, which explains how and why a business divides its fixed costs by its contribution margin per unit.

Accepted Answer

The correct answer is "Breakeven Point in Units" because this concept involves dividing fixed costs by the contribution margin per unit to determine the number of units a business needs to sell to cover all its costs, thus reaching its breakeven point.

Question 8

Calvin's Calendar Company has assets of $75,000 and liabilities of $15,000. How much is Calvin's owner equity

Accepted Answer

Owner equity is calculated by subtracting liabilities from assets, so $75,000 (assets) - $15,000 (liabilities) = $60,000 (owner equity).

Question 9

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

Accepted Answer

The statement of cash flows shows the cash inflows and outflows for a particular period. It provides information on operating, investing, and financing cash flows and helps in understanding the liquidity of a company. A balance sheet shows the assets, liabilities, and equity of a company at a specific point in time, while an income report shows revenue, expenses, and net income over a period. A revenue summary is a specific document that details a company's revenue. Therefore, the statement of cash flows is the best choice for this question.

Question 10

Cash flows from _____ activities result from obtaining or paying back the funds with which you've financed your business.

Accepted Answer

Cash flows from financing activities result from obtaining or paying back the funds with which you've financed your business, such as obtaining a loan, issuing stock, or paying dividends to shareholders.

Question 11

SCENARIO-BASED
As a junior accountant for the Waterford Crystal Co. of New Bedford, Connecticut, you’ve just completed an intensive four-week initial training session. During your first week at Waterford, you’ll be applying many of the concepts that you worked so hard to understand over the course of four grueling years of college accounting classes: sales revenues, cost of goods sold, operating and administrative costs, taxes, interest expenses, and net profit. In week two, you’ll get some actual experience working with current and long-term assets, current and long-term liabilities, and owner’s equity. In your third week, you’ll be keeping track of all cash coming into and going out of the business.
-Your balance sheet will report Waterford's _____.

Accepted Answer

The balance sheet reports all of Waterford's assets, liabilities, and owner's equity.

Question 12

Cash flows from _____ activities are derived from the day-to-day operations of your main line of business.

Accepted Answer

Cash flows from operating activities are derived from the day-to-day operations of the main line of business, including sales revenue, expenses for goods and services, and any other operating expenses or income. Investing activities refer to the buying or selling of long-term assets, while sales would fall under operating activities but is not specific enough to be the correct answer. Quotidian is a synonym for daily but is not commonly used in the context of accounting or finance.

Question 13

Your balance sheet is based on the _____ equation: Assets = Liabilities + Owner's equity.

Accepted Answer

The correct equation is known as the accounting equation, which forms the foundation of double-entry bookkeeping in the accounting system.

Question 14

The difference between gross profit and operating expenses is _____.

Accepted Answer

Gross profit is the revenue earned minus the cost of goods sold, while operating expenses are the costs incurred to run the business operations. The difference between the two is net income, which is the profit earned after all expenses have been paid.

Question 15

SCENARIO-BASED
As a junior accountant for the Waterford Crystal Co. of New Bedford, Connecticut, you’ve just completed an intensive four-week initial training session. During your first week at Waterford, you’ll be applying many of the concepts that you worked so hard to understand over the course of four grueling years of college accounting classes: sales revenues, cost of goods sold, operating and administrative costs, taxes, interest expenses, and net profit. In week two, you’ll get some actual experience working with current and long-term assets, current and long-term liabilities, and owner’s equity. In your third week, you’ll be keeping track of all cash coming into and going out of the business.
-During your third week at Waterford, you'll be working with _____.

Accepted Answer

During the third week, the junior accountant will be keeping track of all cash coming into and going out of the business, which is the main focus of a cash flow statement. Therefore, choice C is the best choice.

Question 16

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

Accepted Answer

Breakeven analysis looks at the relationship between fixed costs, variable costs, and revenue to determine the point at which a business is neither making a profit nor incurring a loss - this is known as the breakeven point. Knowing this point allows a business to set sales targets to ensure that it is making a profit.

Question 17

Your _____ statement shows your revenues and expenses.

Accepted Answer

An income statement shows the revenues and expenses of a company, while a profit and loss statement calculates the net income or loss (profit minus expenses). An operating statement and balance statement are not commonly used terms in accounting.

Question 18

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

Accepted Answer

Fixed costs, as the name suggests, remain fixed or constant regardless of the quantity of goods sold. These costs include expenses such as rent, salaries, and insurance, which do not change with changes in production or sales levels.

Question 19

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

Accepted Answer

Breakeven analysis is a financial calculation that determines the point at which sales revenues will exactly cover all expenses - neither profit nor loss will be incurred. It is a useful tool for determining pricing strategies and assessing business profitability.

Question 20

Rather than record sales and purchases made on credit, your statement of _____ tells you where your cash came from and where it went.

Accepted Answer

A statement of cash flows shows the movement of cash within a business during a specific period of time. It categorizes cash inflows and outflows into operating, investing, and financing activities and provides information on how the company obtained and used its cash.

Quiz 12: The Role of Accounting in Business