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 […]
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 […]
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 […]
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. […]
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 […]
QUESTION Why is it important that external audits be independent audits? What will be an ideal response? ANSWER Answer: External audits must be independent because the outsiders for which they are performed rely on them being unbiased opinions about the truth of the financial data being reviewed. Explanation: External auditors perform audits under the […]
QUESTION Briefly summarize the six steps of the accounting process. What will be an ideal response? ANSWER Answer: In the accounting process, an accountant finds and sorts records, puts daily transactions in journals, puts journal entries in categories in a ledger, tests the accuracy of the ledger by running a trial balance, reports on […]
QUESTION Which of the following is NOT true of the statement of cash flows? A) It reveals the firm’s cash receipts. B) It shows disbursement related to the firm’s operating activities. C) It shows disbursement related to the firm’s investing activities. D) It reports over a defined period of time. E) It determines the gross […]
QUESTION What do you subtract from gross sales to arrive at net sales? A) retained earnings B) dividend payments C) owners’ equity D) sales returns and allowances E) notes payable ANSWER Answer: D Explanation: D) To arrive at net sales, sales returns and allowances must be subtracted from gross sales.
QUESTION Which of the following is equal to the cost of goods sold? A) the salaries and commissions paid to salespeople B) the interest paid on debts C) the amount spent to produce a firm’s merchandise D) the amount spent on customer refunds E) total operating expenses ANSWER Answer: C Explanation: C) The cost […]
