QUESTION Why is double-entry bookkeeping important? What will be an ideal response? ANSWER Answer: With double-entry bookkeeping, each transaction is recorded as both a credit and a debit, making it less likely that there will be errors because both accounts must be reconciled with each other. Explanation: With double-entry bookkeeping, each transaction is recorded […]
QUESTION Why do you think management by data will, ultimately, be a good thing for all corporations? What will be an ideal response? ANSWER Answer: Just as competition is good for a free market economy, so too is the new trend of management by data. As companies try to keep ahead of their rivals […]
QUESTION What is an example of a liability? What will be an ideal response? ANSWER Answer: Outside vendors that have provided labor but not yet been paid represent a debt to the firm and, therefore, a liability. Explanation: A liability is a debt owed by a firm to an outside individual or organization. Outside […]
QUESTION If fixed assets are assets that are held for a long time, and a certain company has had goodwill for all of its years in business, then should its goodwill be considered a fixed asset? What will be an ideal response? ANSWER Answer: Fixed assets are TANGIBLE assets that are held onto for […]
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 […]
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. […]
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 […]
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 […]
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 […]
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 […]
