Chapter 4

Question 1

Classified balance sheet

Answer 1

A balance sheet that places each asset and each liability into a specific category

Question 2

Liquidity

Answer 2

A measure of how quickly an item can be converted to cash

Question 3

Temporary account / nominal accounts

Answer 3

Revenues, expenses, income summary, and owner withdrawal

Question 4

Permant account / real accounts

Answer 4

Assets, liabilities, and owner capital accounts

Question 5

Closing entries

Answer 5

Entries that transfer the revenues, expenses, and owner withdrawal/capital to prepare the company’s books for the next period.

Question 6

Income summary

Answer 6

A temporary account into which revenues and expenses are transferred prior to their final transfer into the owner Capital account. Summarizes net income (or net loss) for the period

Question 7

Current ratio

Answer 7

Measures a companies ability to pay its current liabilities with its current assets.

Current ratio = total current assets/total current liabilities

Question 8

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