Question 1

A balance sheet is composed of assets,liabilities,and revenues.

Accepted Answer

A balance sheet is composed of assets, liabilities, and equity, not revenues.

Question 2

The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

Accepted Answer

The income statement reports a firm's revenues, expenses, and net income over a certain period of time. It does not report the difference between assets and liabilities as of a certain date, which is reported on the balance sheet.

Question 3

Liabilities are reported on the income statement.

Accepted Answer

Liabilities are reported on the balance sheet, not the income statement. The income statement reports revenues and expenses and their resulting net income or loss.

Question 4

Juliet has found that her small business needs a better way to maintain accounting records and analyze business opportunities.Currently,she uses a manual accounting system.These days,any off-the-shelf accounting package available at a local software retailer should do an excellent job of meeting her firm's accounting needs.

Accepted Answer

The answer of Juliet has found that her small business...

Question 5

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Accepted Answer

The fundamental accounting equation is Assets = Liabilities + Owners' equity.

Question 6

Assets are reported on the firm's balance sheet.

Accepted Answer

Assets are reported on the firm's balance sheet as they represent the resources owned by the company, such as cash, accounts receivable, inventory, and property, among others.

Question 7

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.

Accepted Answer

The trial balance is used to prepare the financial statements, including the balance sheet, income statement, and statement of cash flows.

Question 8

The cost of goods sold includes all the costs of buying and keeping merchandise available for sale.

Accepted Answer

The cost of goods sold (COGS) is the total cost of all inventory sold during a specific period of time. It includes the cost of purchasing the merchandise, any freight or shipping costs, and any direct labor or overhead costs associated with storing or preparing the inventory for sale.

Question 9

Olivia is a public accountant.She prepares monthly financial statements for her client,Chick's Auto Body Shop.Presently,though,she must summarize the data in the accounting ledgers to determine if the figures are correct and balanced.Olivia will prepare a statement of cash flows in order to complete this step of the cycle.

Accepted Answer

Olivia would not prepare a statement of cash flows to determine if the figures in the accounting ledgers are correct and balanced. A statement of cash flows shows how cash has flowed in and out of a business over a period of time. Olivia would likely use a trial balance or other reconciliation tools to ensure the figures are balanced.

Question 10

An income statement reports what a company owns and owes on a certain day.

Accepted Answer

An income statement, also known as a statement of operations or profit and loss statement, reports a company's revenues and expenses over a certain period of time (usually a month, quarter, or year). It shows whether the company has earned a profit or suffered a loss during that period, but it does not report what the company owns and owes on a certain day. That information would be found on a balance sheet.

Question 11

In addition to the tasks of recording and classifying accounting information,the best accounting software programs currently available for small businesses have the ability to make financial decisions,thus eliminating the need for owners of small businesses to consult with accountants or understand accounting terminology.

Accepted Answer

While accounting software programs can make financial tasks easier, they cannot replace the expertise and analysis provided by accountants. Small business owners may still need to consult with accountants and understand accounting terminology for effective financial management.

Question 12

Bark Three Times Pet Store recently hired an accountant to make sense of each day's transactions,and keep better financial records for the business.The accountant showed the owner that the ledger in a computerized accounting system would automatically take entries and post them to the correct accounts in the ledger,making the bookkeeping tasks much easier.

Accepted Answer

This statement explains the benefits of using a computerized accounting system's ledger, which automatically posts entries to the correct accounts, making bookkeeping tasks easier.

Question 13

Assets are economic resources that are owned by a firm.

Accepted Answer

Assets are items of economic value owned by a firm that have the potential to generate future economic benefits. Examples include cash, inventory, equipment, and property.

Question 14

A firm's balance sheet reports its financial condition on a specific date.

Accepted Answer

A balance sheet provides information about a company's assets, liabilities, and equity at a specific point in time, typically the end of a fiscal period.

Question 15

Computerized accounting programs have eliminated the need to prepare a trial balance.

Accepted Answer

While computerized accounting programs can automate many tasks, including preparing financial statements, a trial balance is still a crucial step in the accounting process to ensure accuracy of recorded transactions.

Question 16

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

Accepted Answer

This is a fundamental accounting equation and principle. The balance sheet is a snapshot of a company's financial position at a specific point in time and it must balance, meaning that total assets must equal the total of liabilities and equity.

Question 17

Courtney McRae started the Row-Your-Boat paddle boat and row boat business at a nearby lake resort.She wanted to combine her accounting degree with her love of the outdoors and fishing.One of her first business purchases was a computerized accounting system.She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her to interpret the results.As she put it,"It should make the decisions for me!"

Accepted Answer

The answer of Courtney McRae started the Row-Your-Boat paddle boat...

Question 18

The key financial statements are the balance sheet,the income statement,and the statement of cash flows.

Accepted Answer

The balance sheet, income statement, and statement of cash flows are the three key financial statements used by businesses to report their financial performance and position.

Question 19

The balance sheet reports revenues and selling costs for a period of time.

Accepted Answer

The balance sheet reports a company's assets, liabilities, and equity at a specific point in time, not revenues and selling costs for a period of time. The income statement is the financial statement that reports revenues and expenses for a period of time.

Question 20

The steps in the accounting cycle do not need to be followed in the order stated.Monthly financial statements can be prepared with a good amount of accuracy,prior to posting in the ledger or preparing the trail balance.

Accepted Answer

The steps in the accounting cycle should be followed in the proper sequence, and preparation of financial statements without completing these steps can lead to errors and inaccuracies. Monthly financial statements should be based on accurate and up-to-date information, which can only be achieved by following the proper accounting cycle.

Quiz 17: Understanding Accounting and Financial Information