Business X-100 - Chapter 17 Assigned Reading and Pre-class Quiz on Understanding Accounting & Fi

In using the accounting equation, if assets = $40,000 and liabilities = 30,000, then owner's equity is equal to _____

$10,000

The recording, classifying, summarizing, and interpreting of financial events and transactions to provide management and other interested parties the information they need to make good decisions

Accounting

_____ ratios tell us how effectively management is turning over inventory.

Activity

The ratios that measure the effectiveness of a firm's management in turning over inventory are called ______.

Activity ratios

List the steps in the accounting cycle from beginning to end. Place the first step on top and list them down to the last step on the bottom.

Analyze source documents Record transactions in journals Transfer journal entries to a ledger Take a trial balance Prepare financial statements Analyze financial statements

_____ is the systematic write-off of the cost of a tangible asset over its estimated useful life.

Depreciation

Sales, purchasing, and shipping documents are all considered examples of

Inputs

What type of ratios measure how effectively a firm is using its various resources to achieve profits?

Profitability

_____ ratios measure how effectively a firm is using its various resources to achieve profits.

Profitability or Performance

What is the primary report given to the IRS by an organization?

Tax return

Assets, liabilities, and owners' equity are the major accounts listed on ______.

a balance sheet

The income statement shows:

a firm's profit (or loss) after costs, expenses, and taxes

Net income or loss is:

all revenue minus all expenses and taxes

Items of value owned by a firm are called _____

assets

Which three components make up the fundamental accounting equation?

assets liabilities owners' equity

The key working areas of accounting include _____, managerial accounting, financial accounting, tax accounting, government and nonprofit accounting.

auditing

The ______ reports a firm's financial condition on a specific date, whereas the ______ summarizes revenues, costs, and expenses for a specific period.

balance sheet income statement

The _____ line is another name for net income after taxes.

bottom

What term describes the cost of merchandise the firm sells?

cost of goods sold

In accounting, liabilities refer to _____.

debts a business owes to others

True or false: Gross profit is what a company shows on their income statement as the bottom line figure.

false; net income

financialA company's _____ statements summarize all of the transactions that have occurred over a particular period.

financial

Which are considered to be the working areas of accounting? (Select all that apply)

financial accounting managerial accounting auditing tax accounting governmental and not-for-profit accounting

Owners, creditors, and suppliers will be most interesting in which type of account report?

financial statements

Stockholders, labor unions, employees, and the Internal Revenue Service are all interested in the financial health and stability of a firm. This information can be found in a firm's _____.

financial statements

Another term for gross profit is ______.

gross margin

A company's net sales minus cost of goods sold is called ______.

gross profit

Which financial statement shows a firm's bottom line—its profit (or loss) after costs, expenses, and taxes for a specific period?

income statement

Bank, travel, and entertainment records will be found in which segment of the accounting system?

inputs

What are the three major categories on the balance sheet?

labilities owners' equity assets

What type of ratios measure the degree to which a firm relies on borrowed funds in its operations?

leverage

_____ ratios measure the degree to which a firm relies on borrowed funds in its operations.

leverage or debt

What is another name for debts?

liabilities

_____ ratios measure a company's ability to turn assets into cash to pay its short-term debt.

liquidity

What type of ratio measures a company's ability to turn assets into cash to pay its short-term debts?

liquidity ratio

The bottom line is another name for ______.

net income or loss

Depreciation is considered a type of ______.

operating expense

In operating a business, rent, salaries, supplies, utilities and insurance are all examples of ______.

operating expenses

In the accounting equation, what is the term for the difference between assets and liabilities?

owners' equity

The value of what stockholders own in a firm minus any liabilities is called ______.

owners' equity

The formula for the costs of goods sold is ______.

purchase price + freight charges + storage costs

Operating expenses include which of the following?

rent utilities supplies

The key financial statements of a business are the balance sheet, the income statement, and the ______.

statement of cash flows

What are the key financial statements of a business?

statement of cash flows balance sheet income statement

On a balance sheet, assets may include _____.

tangible resources intangible resources goodwill

A _____ accountant is trained in tax law and is responsible for preparing tax returns or developing tax strategies.

tax

A _____ accountant is trained in tax law and is responsible for preparing tax returns.

tax