FI 106

An important purpose of accounting is to provide accurate financial information that is useful to

• management.

• suppliers.

• employees.

• government.

What do managers use for financial planning purposes?

• Production schedules

• Operating standards

• Business policies

• Accounting information

A business can determine its net income by subtracting total

• liabilities from assets.

• expenses from gross margin.

• sales revenue from trade credit.

• operating expenses from net worth.

A financial statement of a firm's current assets and liabilities is called a(n)

• income statement.

• cash-flow projection.

• balance sheet.

• profit-and-loss statement.

The profit a business has earned can be determined from the business's

• income statement.

• balance sheet.

• assets.

• budget.

A business has an inventory valued at $750,000. This amount would appear in the business's balance sheet under

• current assets.

• liabilities.

• capital gains.

• income.

Which of the following would be included in a business's income statement:

• Operating expenses

• Liabilities

• Cash on hand

• Net worth

When customers buy on credit, the money owed the business by the customers is part of the business's

• accounts payable.

• current liabilities.

• accounts receivable.

• cash receipts.

A characteristic of the accrual method of accounting is that it

• records transactions at the time the money changes hands.

• is the method most frequently used by small businesses.

• is the method used by businesses that don't offer credit.

• records credit purchases when the purchases are made.

What step in the accounting cycle occurs after journal entries are posted to the business's ledger?

• Source documents are gathered.

• A trial balance is prepared.

• Transactions are classified.

• Receipts are disbursed.