Exam #2 - Accounting

A company reports financial results from July 1, 2025 through June 30, 2025. This period is an example of

Fiscal Year

The income statement ultimately shows whether a business earned:

Net income or net loss

Which group receives detailed income statement reports that compare actual results to operating budgets?

internal users

Potential investors and creditors are considered:

external users

Revenue from the sale of goods is generally recorded when:

a sale occurs and ownership transfers

When merchandize is sold, the sales account is typically:

credited

Goods purchased for resale are generally recorded as:

inventory

When inventory is sold, its cost is transferred to:

cost of goods sold

Which best describes a profit center?

a department that generates revenues and incurs expenses

A gain differs from revenue because a gain usually results from:

peripheral or incidental activities

A company uses a fiscal year ending September 30, 2026. Which statement best describes the company’s balance sheet?

It reports assets, liabilities, and equity at September 30, 2026, a single point in time

The balance sheet is also known as the statement of:

financial position

Which ratio is calculated by dividing current assets by current liabilites?

current ratio

Liquidity measures a firm’s ability to convert assets into:

cash

Comparing balance sheets from multiple periods helps identify:

trends and meaningful changes

Which is NOT one of the major limitations of the balance sheet?

It reflects all human resource investments

Depreciation is intended to:

match the cost of an asset with the revenue it helps generate

Net Working Capital equals:

current assets - current liabilites

A hotel manager is reviewing the property’s balance sheet. The hotel reports the following current assets:

• Cash: $25,000

• Guest Accounts Receivable: $15,000

• Food and Beverage Inventory: $10,000

What is the hotel’s total current assets balance?

$50,000

Accounts receivable should be reported at the amount expected to be:

collected

Cash is considered the most ______ current asset.

liquid

Which of the following is generally considered a cash equivalent?

money market investment with very short maturity

Separating cash-handling duties among employees primarily helps:

make fraud more difficult

Employees who handle cash should not also have access to:

accounting records

Disbursements should generally be made by check or EFT after proper:

authorization procedures

Why are pre-numbered sales tickets used?

to create an audit trail

Daily deposits of cash help ensure that:

receipts are promptly deposited intact

A voucher is best described as:

written authorization to make a cash payment

When establishing a petty cash fund, which account is debited?

petty cash

In a bank reconciliation, deposits in transit and outstanding checks commonly explain differences between:

bank and book balances