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Exam 17: Understanding Accounting and Financial Information

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Question 111

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Financial ratios are used to analyze a firm's financial condition and financial performance.

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Question 112

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Isabel created Waterfront Sports at a nearby lake resort. She wanted to combine her accounting degree with her love of the outdoors and kayaking. One of her first business purchases was a computerized accounting program. 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!"

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Question 113

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A bookkeeper's first task is to

What is ratio analysis? Explain the four different types of ratios and how each is used.

Tracy wants to start her own business, but knows little about how to set up an accounting system or interpret financial information. "I'm not worried about accounting," she tells her friends. "I'll just hire a part-time bookkeeper to handle all that type of stuff, and focus my attention on what I like-finding ways to satisfy my customers." Which of the following is the best response to Tracy's comments?

Ivy is a bookkeeper for the Newport Corporation. She takes the firm's transactions and records them in a record book or computer program referred to as

Accountants not only provide financial information to the firm, they

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and governmental and not-for-profit accounting.

Purchasing insurance, paying employees, and using supplies are examples of financial transactions.

The main reason an accountant would conduct a trial balance is to

Budget preparation is one aspect of managerial accounting.

One of the key financial statements prepared in the fifth step of the accounting cycle is

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Assets are economic resources that are owned by a firm.

Money received from tickets sold for the Taylor Swift concert is recorded as net income on the concert promoter's income statement.

Sophie has been a bookkeeper for a small chain of boutiques for nearly four years. Six months ago, the manager retired and a new manager was brought in. The new manager routinely asks her for information and advice about how to interpret the information she records. Sophie's experience as a bookkeeper means she is qualified to provide this type of advice.

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Valeria, owner of Coolest Closet, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders?

At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.