Accounting

The overall purpose of accounting is to

• maintain accurate reports.

• compile the business’s expenses.

• keep track of sales.

• control the finances of the business.

Why are accurate accounting records important to a business?

• They prevent any financial losses.

• They show the business how it is doing.

• They increase the return on investments.

• They give the business an image of success.

For an accounting system to be useful to the business, the accounting information it contains must be

• accurate and up to date.

• approved by the chief executive officer.

• posted by an accountant.

• recorded using the accrual method.

Two employees used a business’s computerized accounting system to change some records. They were able to steal $50,000 from the business because the accounting system lacked which of the following:

• Protection from theft and fraud

• An affordable price

• A manual system as backup

• Printed financial statements

What type of accounting method would most likely be used by a small business owner who does not offer credit?

• Check method

• Accrual method

• COD method

• Cash method

What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts?

• Check method

• Accrual method

• COD method

• Cash method

Which of the following categories of information are found on a balance sheet:

• Income, expenditures, profit

• Assets, liabilities, owner’s equity

• Assets, liabilities, margin

• Revenues, expenses, profit

A bank denies a business owner’s application for credit saying, “We feel that you would be unable to make the monthly payments because of your other debts.” What financial report did the bank review?

• Budget

• Balance sheet

• Income statement

• Operating budget

What accounting record would summarize a business’s profit or loss for a previous year?

• Bank statement

• Inventory record

• Income statement

• Balance sheet

Which of the following financial reports provides estimates of when, where, and how much money will come into and out of a business next year:

• Balance sheet

• Cash flow statement

• Income statement

• Bank statement