Business Principles Chapter 17-Bonus Chapter A

If the boss asks a company accountant to lie on the company's financial statements, what should the accountant do?

• According to the FASB (Financial Accounting Standards Board) ruling says if the boss agrees to sign-off on accounting documents, the accountant is safe from prosecution.

• According to the FASB, as long as you are not a certified internal auditor, you will not be held accountable for such actions.

• As a professional, the accountant is held to the standards of generally accepted accounting principles and the FASB. If these guidelines are not followed, the accountant is potentially liable for illegal and unethical behavior.

• Investors use a variety of methods to determine if a firm is fundamentally sound, so they are less likely to grimace at your actions as the IRS, who want to make certain that your firm is paying its taxes. For investors, your books are only one piece of the puzzle.

The Statement of Cash Flows, the Income Statement and the ______________ are three key financial statements prepared by accountants.

• Trial Balance

• Statement of Retained Earnings

• Balance Sheet

• Statement of Changes in Financial Position

A company balance sheet show the assets, owner's equity and __________ of a firm at a specific point in time.

• Sales

• Revenue

• Liabilities

• Expenses

An income statement reports both a company's selling costs and __________ over a period of time.

• assets

• revenue

• liabilities

• equity

A ___________ provides a summary of cash coming into and money going out of a firm from operations activities, financing activities, and investing activities.

• income statement

• statement of cash flows

• cash budget

• cash receivable and payables report

The fundamental accounting equation states: ________ = liabilities + _____________.

• revenue, expenses

• assets, revenue

• sales, owner's equity

• assets, owner's equity

The Hornet's Nest has a balance sheet that shows assets of $100,000 and owner's equity of $25,000. Which of the statements is true?

• Liabilities equal $125,000

• Current assets are worth $75,000.

• Net Income for the period is $125,000

• Liabilities equal $75,000

A business has revenue of $5,000. The business spent $2,000 on purchasing merchandise. They also have $1,000 in expenses. What is the gross profit?

• $2,000

• $3,000

• $4,000

• $8,000

A business has revenue of $5,000. The business spent $2,000 on purchasing merchandise. They also have $1,000 in expenses. What is the net income?

• $2,000

• $3,000

• $4,000

• $8,000

The financial ratios that measure a firm's ability to pay its short-term debts are called:

• leverage ratios

• liquidity ratios

• equity ratios

• profitability ratios