QUESTION How does the cost of goods sold affect the gross profit as calculated in an income statement? A) It helps to predict what future profits will be. B) It increases the gross profits. C) It is figured into operating expenses. D) It does not affect the gross profits. E) It is subtracted from net […]
Date: September 3rd, 2020
QUESTION What is the importance of owners’ equity in accounting? What will be an ideal response? ANSWER Answer: Owners’ equity is considered important because it is used to indicate a company’s financial strength and stability. Before making loans to a company, for example, lenders want to know the amount of owners’ equity in it. […]
Date: September 3rd, 2020
QUESTION Thom is an accountant at Merco Products. Merco has decided to put a priority on paying off short-term debt to ensure its continued financial health. Which of the following types of ratio analyses is Thom most likely to do to further this goal? A) an activity ratio B) a debt-to-owners’-equity ratio C) a liquidity […]
Date: September 3rd, 2020
QUESTION What is balanced in a balance sheet? What will be an ideal response? ANSWER Answer: A balance sheet shows a balance between a firm’s assets and liabilities plus owners’ equity, per the “accounting equation.” Explanation: A balance sheet reports a firm’s financial condition at a given time by showing its assets, liabilities, and […]
Date: September 3rd, 2020
QUESTION How does accounting differ from bookkeeping? What will be an ideal response? ANSWER Answer: Bookkeeping is basically the recording of a firm’s financial transactions, while accounting makes use of data recorded in bookkeeping to give financial information that helps people inside and outside a company make good financial decisions. Explanation: Accounting is the […]
Date: September 3rd, 2020
QUESTION What is the difference between net sales and gross sales? What will be an ideal response? ANSWER Answer: Gross sales are the funds received from all sales of the firm’s products. Net sales is the money resulting after sales returns and allowances are subtracted from gross sales. Explanation: Gross sales are the funds […]
Date: September 3rd, 2020
QUESTION What are the three principles of the open-book management approach? What will be an ideal response?c ANSWER Answer: The open-book management approach has three principles: the first is to create a transparent company in which everyone sees and understands the numbers; the second is to create a system of joint accountability, which holds […]
Date: September 3rd, 2020
QUESTION What is the difference between net income and gross profit? What will be an ideal response? ANSWER Answer: Gross profit, or gross margin, is the amount remaining after the cost of goods sold is subtracted from the net sales. Net income is the firm’s profit or loss after paying income taxes, and it […]
Date: September 3rd, 2020
QUESTION What is the difference between managerial and financial accounting? What will be an ideal response? ANSWER Answer: Whereas managerial accounting is concerned with preparing accounting information and analyses for managers and other decision makers inside an organization, financial accounting is concerned with preparing such information and analyses primarily for people outside the organization. […]
Date: September 3rd, 2020
QUESTION The Mystery Book Nook is a new shop in a busy suburban mall. Which of the following will contribute to a healthy activity ratio for it? A) having a high owners’ equity B) keeping enough cash on hand C) having high net sales revenues D) having enough liquidatable assets E) maintaining a small inventory […]
Date: September 3rd, 2020
