Module 3

Question 1

The trial balance contains two types of accounts—____ accounts and _____ accounts.

Answer 1

real; nominal

Question 2

Real accounts end up on the _______ and reflect the cumulative balance in each account from the inception of the business.

Answer 2

balance sheet

Question 3

What are examples of real accounts?

Answer 3

Assets, liabilities, owner’s equity

Question 4

Nominal accounts end up on the ___________and their

balances represent activity over a certain period of time.

Answer 4

income statement

Question 5

What are examples of nominal accounts?

Answer 5

Revenues and expenses

Question 6

At the end of each accounting period, the balance of all nominal accounts are transferred to ___________ (part of owners’ equity, a real account), so their balances start back at zero at the beginning of each accounting period.

Answer 6

retained earnings

Question 7

Accounts on the trial balance typically are combined into _________ accounts for presentation on the balance sheet and income statement.

Answer 7

condensed

Question 8

The ________ provides a snapshot of the business at a specific point in time.

Answer 8

balance sheet

Question 9

The balance sheet shows all of the asset, liability, and owners’ equity accounts as of that specific ____.

Answer 9

date

Question 10

Under ______, the balance sheet presents accounts in the following order: current assets, non-current assets,
current liabilities, non-current liabilities, and owners’ equity.

Answer 10

US GAAP

Question 11

Within each asset and liability group, items are presented in order of _______.

Answer 11

liquidity, with the most liquid (those that can be most easily and quickly converted to cash) first.

Question 12

Under _____, the balance sheet is generally presented with the least liquid items first, and in the following order: non-current assets, current assets, owners’ equity, non-current liabilities, and current liabilities.

Answer 12

IFRS

Question 13

The _________ shows all revenue and expense accounts for a given period of time.

Answer 13

income statement

Question 14

Using __________ from any two points in time, a business can create an income statement that will tell the financial story of the activities for that period.

Answer 14

trial balances

Question 15

The ________ can show the following measures of income: gross profit, operating income, income before taxes, and finally, net income.

Answer 15

income statement

Question 16

What is sales less cost of goods sold?

Answer 16

gross profit

Question 17

What is gross profit less operating expenses?

Answer 17

operating income

Question 18

What is operating income less non-operating

expenses?

Answer 18

income before taxes

Question 19

What is income before taxes less taxes?

Answer 19

net income

Question 20

Together, the _________ and _________ are two important financial statements that show the company’s financial position.

Answer 20

balance sheet; income statement