Exam 12: The Role of Accounting in Business

As a junior accountant for the Waterford Crystal Co. of New Bedford, Connecticut, you’ve just completed an intensive four-week initial training session. During your first week at Waterford, you’ll be applying many of the concepts that you worked so hard to understand over the course of four grueling years of college accounting classes: sales revenues, cost of goods sold, operating and administrative costs, taxes, interest expenses, and net profit. In week two, you’ll get some actual experience working with current and long-term assets, current and long-term liabilities, and owner’s equity. In your third week, you’ll be keeping track of all cash coming into and going out of the business. -During week two,you'll get some experience working with _____.

Brenda Sinatra is senior analyst at a major Oregon accounting firm. One facet of her job is determining how much of each sales dollar is left after a client has covered certain costs. She’s also responsible for calculating how efficiently a client company’s assets are being managed. Another aspect of her job calls for measuring overall company performance and determining how effectively management is running the company. Finally, she reports on the firm’s financial strength to its board of directors -The second aspect of Brenda's job involves profit margin ratios.

To calculate a firm's current ratio,you divide its current assets divided by its _____.

Profit margin ratios help a company assess its financial strengths.

As a junior accountant for the Waterford Crystal Co. of New Bedford, Connecticut, you’ve just completed an intensive four-week initial training session. During your first week at Waterford, you’ll be applying many of the concepts that you worked so hard to understand over the course of four grueling years of college accounting classes: sales revenues, cost of goods sold, operating and administrative costs, taxes, interest expenses, and net profit. In week two, you’ll get some actual experience working with current and long-term assets, current and long-term liabilities, and owner’s equity. In your third week, you’ll be keeping track of all cash coming into and going out of the business. -During your third week at Waterford,you'll be working with _____.

The cost of using a long-term asset (such as a vehicle)that will be used in a business for several years is spread over the asset's useful life.Its annual allocated cost appears on the income statement as a(n)_____ expense.

_____ costs vary with quantity of goods sold but remain constant on a per-unit basis.

If she wants to know how competently her company's assets are being managed,junior accountant Amy Duerkin will analyze its _____ ratio.

_____ costs don't vary with quantity of goods sold.

A firm can measure its overall performance and find out how successfully it's being run by analyzing its _____ ratio.

_____ are principles for financial reporting established by an independent agency called the Financial Accounting Standards Board.

Accounting is often called "the language of business."

Calvin's Calendar Company has assets of $75,000 and liabilities of $15,000.How much is Calvin's owner equity?

The purpose of accounting is to help _____,who are interested in the activities of a business because they're affected by them.

Under accrual accounting,accounts receivable are recorded when sales are made and accounts payable when payments have been received.

A more sophisticated kind of balance sheet is called a classified balance sheet.

The _____ Act severely restricts the ability of accountants to serve the same clients as both auditors and consultants.

In order to examine a firm's capital structure,you would look at its debt debt-to-equity ratio.

A long-term asset that will be used for several years-say,a vehicle-appears on the income statement as a depreciation expense.

To determine a company's interest coverage,you divide its operating income by its _____.