D774 INTRODUCTION TO BUSINESS ACCOUNTING -
SECTION 2 - PA QUESTIONS WITH VERIFIED
ACCURATE ANSWERS
What is the accounting equation, and what are its elements? - Answers - It shows what
a company owns and how what it owns was financed—through either debt or equity.
Assets = Liabilities + Owners' Equity.
What is a classified balance sheet? - Answers - A balance sheet distinguishes between
current and long-term assets and current and long-term liabilities.
What is a comparative balance sheet? - Answers - A balance sheet includes information
for both the current year and one or more preceding years allowing users to identify any
significant changes in particular items from year to year.
Assets and liabilities are usually listed in what order on the balance sheet? - Answers -
Assets and liabilities are usually listed on a balance sheet in order of their liquidity, that
is, how fast and easily they can be converted to cash.
Owners' equity has two components. What are they? - Answers - Capital Stock and
Retained Earnings
You know the amount of a company's assets and the amount of the company's owners'
equity. According to the accounting equation, what computation should you perform to
find out the amount of the company's liabilities? - Answers - Assets minus owners'
equity
Kretsmart Company's financial records include these accounts at the end of the year.
Inventory, Loans Payable, Retained Earnings, Cash, Land, Accounts Receivable,
Accounts Payable, Capital Stock (also called Paid-in Capital), Unearned Revenue
Which set of items composes a complete listing of Kretsmart's assets? - Answers -
Cash, accounts receivable, inventory, and land
Which action causes owners' equity to increase? - Answers - Generating net income
What is the difference between a regular balance sheet and a classified balance sheet?
- Answers - Assets and liabilities are reported separately based on whether they are
current or long term.
What is an accurate description of "mortgage payable"? - Answers - Obligation arising
from the amount of unpaid purchase price related to the purchase of property
What is revenue? - Answers - The amount a company receives from the sale of goods
and services.
, What is an expense? - Answers - The costs incurred to support normal business
operations and generate revenue.
How is net income computed? - Answers - Calculated as the difference between
revenues and all expenses.
What is a multi-step income statement? - Answers - Where the income statement is
divided into separate sections, and various subtotals are reported that reflect different
levels of profitability.
What is a common-size income statement? - Answers - Where the income statement
numbers have been standardized as a percentage of sales.
When the terms are correctly used, what is the difference between revenue and
income? - Answers - Income is a net concept whereas revenue is a gross concept.
How is net income computed? - Answers - revenues minus expenses
In a carefully constructed multi-step income statement, which item is listed between
sales and gross profit? - Answers - Cost of goods sold
When should a passenger airline report the revenue associated with a passenger trip? -
Answers - When the customer has completed the trip
In a multi-step income statement, what is an example of an expense that fits under the
heading "operating expenses"? - Answers - Rent paid for a building used by the
company
A report that enables users to analyze a company's performance over multiple periods
and identify significant trends is a ____________ income statement. - Answers -
Comparative
What are costs incurred to support normal business operations? - Answers - Expenses
What is the single most used number in all the financial statements is net
___________? - Answers - Income
An income statement in which all of the numbers have been divided by sales is called a
_________ size income statement. - Answers - Common
Sales are not recorded until they are __________. - Answers - Earned
Revenue minus cost of goods sold is equal to ________ margin. - Answers - Gross
SECTION 2 - PA QUESTIONS WITH VERIFIED
ACCURATE ANSWERS
What is the accounting equation, and what are its elements? - Answers - It shows what
a company owns and how what it owns was financed—through either debt or equity.
Assets = Liabilities + Owners' Equity.
What is a classified balance sheet? - Answers - A balance sheet distinguishes between
current and long-term assets and current and long-term liabilities.
What is a comparative balance sheet? - Answers - A balance sheet includes information
for both the current year and one or more preceding years allowing users to identify any
significant changes in particular items from year to year.
Assets and liabilities are usually listed in what order on the balance sheet? - Answers -
Assets and liabilities are usually listed on a balance sheet in order of their liquidity, that
is, how fast and easily they can be converted to cash.
Owners' equity has two components. What are they? - Answers - Capital Stock and
Retained Earnings
You know the amount of a company's assets and the amount of the company's owners'
equity. According to the accounting equation, what computation should you perform to
find out the amount of the company's liabilities? - Answers - Assets minus owners'
equity
Kretsmart Company's financial records include these accounts at the end of the year.
Inventory, Loans Payable, Retained Earnings, Cash, Land, Accounts Receivable,
Accounts Payable, Capital Stock (also called Paid-in Capital), Unearned Revenue
Which set of items composes a complete listing of Kretsmart's assets? - Answers -
Cash, accounts receivable, inventory, and land
Which action causes owners' equity to increase? - Answers - Generating net income
What is the difference between a regular balance sheet and a classified balance sheet?
- Answers - Assets and liabilities are reported separately based on whether they are
current or long term.
What is an accurate description of "mortgage payable"? - Answers - Obligation arising
from the amount of unpaid purchase price related to the purchase of property
What is revenue? - Answers - The amount a company receives from the sale of goods
and services.
, What is an expense? - Answers - The costs incurred to support normal business
operations and generate revenue.
How is net income computed? - Answers - Calculated as the difference between
revenues and all expenses.
What is a multi-step income statement? - Answers - Where the income statement is
divided into separate sections, and various subtotals are reported that reflect different
levels of profitability.
What is a common-size income statement? - Answers - Where the income statement
numbers have been standardized as a percentage of sales.
When the terms are correctly used, what is the difference between revenue and
income? - Answers - Income is a net concept whereas revenue is a gross concept.
How is net income computed? - Answers - revenues minus expenses
In a carefully constructed multi-step income statement, which item is listed between
sales and gross profit? - Answers - Cost of goods sold
When should a passenger airline report the revenue associated with a passenger trip? -
Answers - When the customer has completed the trip
In a multi-step income statement, what is an example of an expense that fits under the
heading "operating expenses"? - Answers - Rent paid for a building used by the
company
A report that enables users to analyze a company's performance over multiple periods
and identify significant trends is a ____________ income statement. - Answers -
Comparative
What are costs incurred to support normal business operations? - Answers - Expenses
What is the single most used number in all the financial statements is net
___________? - Answers - Income
An income statement in which all of the numbers have been divided by sales is called a
_________ size income statement. - Answers - Common
Sales are not recorded until they are __________. - Answers - Earned
Revenue minus cost of goods sold is equal to ________ margin. - Answers - Gross
