Unit 3: chapters 8, 9, & 10

Question 1

financial statements

Answer 1

summarizes the changes resulting from business transactions that occur during an accounting period

Question 2

income statement

Answer 2

reports the net income or net loss for a specific period of time

Question 3

statement of changes in owner’s equity

Answer 3

summarizes changes in the owner’s capital account as a result of business transaction that occur during the period

Question 4

balance sheet

Answer 4

a report of the balances in the permanent accounts at the end of the period

Question 5

report form

Answer 5

listing the balance sheet sections one under the other

Question 6

statement of cash flows

Answer 6

a statement that summarizes the cash receipts and cash payments resulting from business activities during a period

Question 7

ratio analysis

Answer 7

the process of evaluating the relationship between various amounts in the financial statements

Question 8

profitability ratio

Answer 8

used to evaluate the earnings performance of the business during the accounting period

Question 9

return on sales

Answer 9

to examine the portion of each sales dollar that represents profit

Net income/Sales

Question 10

current assets

Answer 10

those used up or converted to cash during the normal operating cycle of a business (accounts receivable, cash in bank, supplies)

Question 11

current liabilities

Answer 11

debts of the business that must be paid within the next accounting period

Question 12

working capital

Answer 12

amount by which current assets exceed current liabilities

represents assets that are available to continue business operations

Question 13

liquidity ratio

Answer 13

a measure of the ability of a business to pay its current debts as they become due and to provide for an unexpected need for cash

Question 14

current ratio

Answer 14

reflects the relationship between current assets and current liabilities

current assets/current liabilities

Question 15

quick ratio

Answer 15

a measure of the relationship between short-term assets and current liabilities

cash & receivables/current liabilities

Question 16

work sheet

Answer 16

a working paper used to collect information from the ledger in one place

Question 17

work sheet sections

Answer 17

1. the heading
2. account name & #
3. the trial balance section
4. the income statement
5. the balance sheet

Question 18

Ruling

Answer 18

drawing a line

single-ready to add
double-indicates you balanced

Question 19

Balance sheet

Answer 19

assets, liabilities, and owner’s equity

Question 20

Income statement

Answer 20

revenue and expenses

Question 21

matching principle

Answer 21

expenses have to match revenue

Question 22

net income

Answer 22

amount by which total revenue exceeds total expenses for the accounting period

Question 23

net loss

Answer 23

amount by which total expenses exceeds total revenue for the accounting period