Accounting quiz 1

The current ratio will be _______________ the quick ratio.

greater than or equal to

A system used to identify, analyze, measure, record, summarize, and communicate relevant economic information to interested parties is referred to as a(n):

accounting system

The owner of a dry cleaning business maintains separate checkbooks for his business and his personal affairs. This best describes an application of the:

business entity concept

A law firm is an example of which of the following?

service firm

The trend in ratios is usually more useful than looking at a single year's ratio.

True

A business owned by one person whose personal possessions are at risk if the business fails is called a:

sole proprietorship

All of the following ratios are considered measures of liquidity except:

Debt to Equity ratio.

A company's liquidity refers to its ability to remain profitable.

False

Inventory is an example of a quick asset.

False

The current ratio may be less than, equal to, or greater than the quick ratio.

False

The lower the current ratio, the more liquid the company appears.

False

Vertical analysis compares the results of financial information with a business in the same industry for a number of consecutive periods of time

False

The statements of financial accounting standards, and other authoritative pronouncements that define what constitutes acceptable accounting practice for financial reporting are collectively referred to as:

GAAP

If total current assets are $140,000 at the end of Year 1, increase by $50,000 by the end of Year 2, and increase by $50,000 in Year 3, the percentage increase over the preceding year is less in Year 3 than in Year 2.

True

A business entity which is legally separate and distinct from its owners is called a:

corporation

The accounting concept which assumes that, absent any information to the contrary, the business will continue into the foreseeable future is the:

going concern concept

Wal-Mart is an example of which of the following?

merchandising firm

Every three months, Ashmont Antiques produces a report showing profits earned during the most recently ended quarter. This best describes an application of the:

periodicity concept

The accounting concept requiring that the profits of a business be determined at regular intervals throughout the life of the business is the

periodicity concept