Accounting Processes Data Into Reports And Communicates It

Accountinga Processes Data Into Reports And Communicates The Dat

Accountinga Processes Data Into Reports And Communicates The Dat

1) Accounting: A. processes data into reports and communicates the data to decision makers. B. is often called the language of business. C. measures business activities. D. is all of the above.

2) Assets include​ cash, land, and accounts payable. True False

3) A prepaid expense is an asset. True False

4) The primary objective of financial reporting is to provide information A. on the cash flows of the company. B. to the federal government. C. useful for making investment and credit decisions. D. about the profitability of the enterprise.

5) Each transaction has either an equal effect on both the left - and right- sides of the accounting​ equation, or an offsetting effect​ (both positive and​ negative) on the same side of the equation. True False

6) During​ February, assets increased by $ 87,000 and liabilities increased by $ 31,000. Stockholders' equity must have A. increased by $ 56,000. B. decreased by $ 56,000. C. increased by $ 118,000.

7) Thompson Instruments had retained earnings of $ 340,000 at December​ 31, 2015. Net income for 2016 totaled $ 185,000, and dividends for 2016 were $ 85,000. How much retained earnings should Thompson report at December​ 31, 2016? A. $ 425,000 B. $ 340,000 C. $ 525,000 D. $ 440,)

8) Purchasing a laptop computer on account will A. increase total assets. B. have no effect on​ stockholders' equity. C. increase total liabilities. D. All of the listed choices are correct.

9) Performing a service on account will A. increase total assets. B. increase​ stockholders' equity. C. increase total liabilities. D. accomplish both a and b.

10) Receiving cash from a customer on account will A. decrease liabilities. B. have no effect on total assets. C. increase​ stockholders' equity. D. increase total assets.

11) Which of the following is not an asset​ account? A. Salary Expense B. Common Stock C. Service Revenue D. None of the listed accounts is an asset.

12) The journal entry to record the purchase of supplies on account A. debits Supplies Expense and credits Supplies. B. credits Supplies and debits Cash. C. credits Supplies and debits Accounts Payable. D. debits Supplies and credits Accounts Payable.

13) On January 1 of the current​ year, Bambi Company paid $ 1,500 in rent to cover six months ​(January long dash June). Bambi recorded this transaction as​ follows: Journal Entry Date Accounts Debit Credit Jan 1 Prepaid Rent 1,500 Cash 1,500 Bambi adjusts the accounts at the end of each month. Based on these​ facts, the adjusting entry at the end of January should include A. a debit to Prepaid Rent for $ 1,250. B. a credit to Prepaid Rent for $ 250. C. a debit to Prepaid Rent for $ 250. D. a credit to Prepaid Rent for $ 1,250.

14) On January 1 of the current​ year, Bamber Company paid $ 1,500 in rent to cover six months​ (January -​ June). Bamber​ recorded this transaction as​ follows: Journal Entry Date Accounts Debit Credit Jan 1 Prepaid Rent 1,500 Cash 1,500 Bamber​'s adjusting entry at the end of February included a debit to Rent Expense in the amount of $ 250. What effect does the adjusting entry have on Bamber's net income for​ February? A. Decrease by $ 500 B. Increase by $ 500 C. Decrease by $ 250 D. Increase by $

15) An adjusting entry recorded June salary expense that will be paid in July. Which statement best describes the effect of this adjusting entry on the​ company's accounting​ equation? A. Assets are not​ affected, liabilities are​ increased, and​ stockholders' equity is increased. B. Assets are​ decreased, liabilities are not​ affected, and​ stockholders' equity is decreased. C. Assets are​ decreased, liabilities are​ increased, and​ stockholders' equity is decreased. D. Assets are not​ affected, liabilities are​ increased, and​ stockholders' equity is decreased.

16) All of the following are internal control procedures except A. Sarbanes-Oxley reforms. B. adequate records. C. assignment of responsibilities. D. internal and external audits.

17) Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal​ control? A. Competent and reliable personnel B. Monitoring of controls C. Assignment of responsibility D. Separation of duties

18) In a bank​ reconciliation, an EFT cash payment is A. deducted from the bank balance. B. deducted from the book balance. C. added to the book balance. D. added to the bank balance.

19) If a bookkeeper mistakenly recorded a $ 34deposit as $ 43, the error would be shown on the bank reconciliation as a A. $ 9 addition to the book balance. B. $ 43 deduction from the book balance. C. $ 43 addition to the book balance. D. $ 9 deduction from the book balance.

20) In a bank​ reconciliation, interest revenue earned on your bank balance is A. deducted from the book balance. B. added to the bank balance. C. added to the book balance. D. deducted from the bank balance.

21) Which of the following is included in the calculation of the quick​ (acid-test) ratio? A. Cash and accounts receivable B. Inventory and prepaid expenses C. Prepaid expenses and cash D. Inventory and​ short-term investments

22) A company with net credit sales of $ 1,017,000, beginning net receivables of $ 90,000, and ending net receivables of $ 120,000, has ​ days' sales outstanding of (Round interim calculations to two decimal​ places, XX.XX and the​ days' sales outstanding​ (DSO) up to the next whole​ day.) A. 48 days. B. 41 days. C. 38 days. D. 44 days.

23) Riverview Software began January with $ 3,700 of merchandise inventory. During​ January, Riverview made the following entries for its inventory​ transactions: Inventory 6,600 Accounts Payable 6,600 Accounts Receivable 7,300 Sales Revenue 7,300 Cost of Goods Sold 5,200 Inventory 5,200 How much was Riverview's inventory at the end of​ January? A. $ 5,100 B. $ -0- C. $ 6,600 D. $ 10,

24) Leading Edge Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June follow: Units Unit Cost Total Cost Jun 1 Beginning inventory 2,400 $18.00 $43, Purchase 1,500 $18., Sale (1,800) If Leading Edge Frame Shop uses the LIFO​ method, cost of goods sold will be A. $ 27,450. B. $ 32 ,850. C. $ 32,700. D. $ 32,400 .

25) Two financial ratios that clearly distinguish a discount chain such as Walmart from a​ high-end retailer such as Gucci are the gross profit percentage and the rate of inventory turnover. Which set of relationships is most likely for​ Gucci? Gross profit percentage Inventory turnover A. High High B. Low Low C. Low High D High Low

26) Sales are $ 500,000 and cost of goods sold is $ 320,000. Beginning and ending inventories are $ 28,000 and $ 38,000, respectively. How many times did the company turn its inventory over during this​ period? A. 9.7 times B. 6.4 times C. 15.2 times D. 5.5 times

Paper For Above instruction

The realm of accounting is fundamental to the functioning of modern business, serving as its language and measuring stick. It processes data into reports and communicates relevant information to decision-makers, facilitating informed economic choices. This essay explores various aspects of accounting, its core financial principles, and how it impacts business decision-making processes.

At its core, accounting involves recording, classifying, and summarizing financial transactions to produce meaningful reports. These reports include the income statement, balance sheet, and cash flow statement, each providing different insights into a company's financial health (Anthony & Reece, 2019). The importance of accounting as the language of business stems from its ability to communicate complex financial information clearly, enabling stakeholders such as investors, creditors, and management to evaluate business performance effectively (Schroeder et al., 2021).

Assets represent resources owned by a company that have economic value, such as cash, land, and accounts receivable. Conversely, liabilities are obligations owed to outside parties, including accounts payable. Understanding the distinction between assets and liabilities is crucial for accurate financial reporting, as it directly influences the calculation of equity and overall financial position (Hepp & McDaniel, 2020). For example, purchasing a laptop on account increases assets in the form of equipment but also increases liabilities through accounts payable, illustrating the balance sheet's fundamental equation: Assets = Liabilities + Stockholders’ Equity (Stickney et al., 2019).

Prepaid expenses such as insurance or rent are classified as assets because they represent future economic benefits. When paid in advance, these expenditures are initially recorded as assets and then gradually expensed over the period in which they provide benefit, aligning with the matching principle of accounting (Weygandt et al., 2018). The primary purpose of financial reporting is to furnish relevant, timely information that aids users in making investment and credit decisions. It emphasizes the importance of accurate reporting on profitability, cash flows, and financial position, which collectively influence economic decisions by stakeholders (Kieso et al., 2020).

The accounting equation, Assets = Liabilities + Stockholders' Equity, must always remain balanced. Each transaction influences this equation either directly or through an offsetting effect. For example, an increase in assets coupled with a corresponding increase in liabilities preserves the balance. If assets increase by $87,000 and liabilities by $31,000, then stockholders’ equity must have increased by $56,000, maintaining equation equality (Romney & Steinbart, 2019).

Retained earnings, a component of stockholders' equity, accumulate over time through net income less dividends paid. For Thompson Instruments, with retained earnings of $340,000 at the end of 2015, net income of $185,000, and dividends of $85,000 in 2016, the ending retained earnings are calculated as: $340,000 + $185,000 - $85,000 = $440,000. This reflects the company's retained earnings at the close of 2016, indicating its cumulative net income minus dividends (Weygandt et al., 2018).

Purchasing a laptop on account increases total assets, notably equipment (an asset), and also increases liabilities in the form of accounts payable, leaving stockholders' equity unaffected initially. Similarly, performing services on account increases assets through accounts receivable and simultaneously increases stockholders' equity via revenues generated. Collecting cash from customers on account boosts assets but does not affect liabilities or equity directly, representing a cash inflow resulting from revenue recognition (Anthony & Reece, 2019).

Not all accounts are assets; for example, salary expense, common stock, and service revenue are not classified as assets. Salary expense is an income statement account representing consumed resources; common stock and service revenue are equity and revenue accounts, respectively (Hepp & McDaniel, 2020). To record supplies purchased on account, the correct journal entry debits supplies (an asset) and credits accounts payable (a liability), exemplifying how liabilities and assets are affected by accruals (Romney & Steinbart, 2019).

Prepaid rent is initially recorded as an asset when paid upfront. As each month passes, adjusting entries transfer a portion of prepaid rent to rent expense to reflect the period consumed. For example, paying $1,500 covering six months translates to monthly rent expense of $250, and at the end of January, the adjusting entry debits rent expense and credits prepaid rent for $250 (Weygandt et al., 2018). These adjustments ensure expenses match revenues, aligning with accrual accounting standards.

When salary expenses are accrued but not yet paid, the adjusting entry increases salaries payable (liability) and expenses, impacting the accounting equation by increasing liabilities and decreasing retained earnings, a component of stockholders' equity. This reflects the obligation to pay salaries earned by employees but not yet settled in cash (Kieso et al., 2020).

Internal control procedures are vital for safeguarding assets and ensuring accurate financial reporting. Examples include maintaining adequate records, assigning responsibilities, and conducting internal and external audits. However, Sarbanes-Oxley reforms are regulatory requirements rather than internal controls per se. Requiring personnel without access to cash to handle accounting duties exemplifies segregation of duties, a key internal control characteristic (Hepp & McDaniel, 2020).

Bank reconciliations help ensure consistency between the company’s books and bank statements. An EFT cash payment deducted in the bank statement reduces the bank balance but may need to be adjusted in the company's books depending on timing. Errors such as recording a deposit as $43 instead of $34 would show a discrepancy of $9, requiring an adjustment in the reconciliation process to match the correct amount (Romney & Steinbart, 2019).

Interest earned on bank balances is added to the company's book balance during reconciliation, reflecting accrued interest not yet recorded in the books. The quick ratio, a measure of liquidity excluding inventory, considers cash and accounts receivable, emphasizing the company's ability to meet short-term obligations without relying on inventory sales (Weygandt et al., 2018).

Calculating days' sales outstanding (DSO) involves dividing average accounts receivable by daily sales. For instance, a company with net credit sales of $1,017,000, beginning receivables of $90,000, and ending receivables of $120,000, has an average receivable of ($90,000 + $120,000)/2 = $105,000. Dividing this by average daily sales ($1,017,000/365 ≈ $2,785.75), and then multiplying by 365, yields DSO figures around 41 days, indicating how long on average receivables remain outstanding (Schroeder et al., 2021).

Regarding inventory management, Riverview Software’s ending inventory is derived from beginning inventory plus purchases minus cost of goods sold. After accounting for purchases during January, the ending inventory is calculated as $3,700 + $6,600 - $5,200 = $5,100, which is consistent with physical counts and valuation methods (Anthony & Reece, 2019).

The choice of inventory costing method significantly affects financial reports. Under LIFO, the last units purchased are sold first, leading to higher cost of goods sold during rising prices. Using the provided data, the cost of goods sold under LIFO would be calculated accordingly, resulting in an estimated $32,700 for COGS and, consequently, the gross profit ratio and inventory valuation (Weygandt et al., 2018).

Financial ratios like gross profit percentage and inventory turnover help distinguish retail strategies. Discount retailers like Walmart tend to have high sales volumes with low profit margins and high inventory turnover, whereas luxury retailers like Gucci generally have lower inventory turnover and higher gross profit margins, reflecting their different business models and target markets (Higgins & Stewart, 2020).

Finally, inventory turnover ratio measures how many times inventory is sold and replaced during a period. Calculated as COGS divided by average inventory, a company with COGS of $320,000, beginning inventory of $28,000, and ending inventory of $38,000, would have an average inventory of ($28,000 + $38,000)/2 = $33,000. Therefore, inventory turnover is $320,000 / $33,000 ≈ 9.7 times, indicating efficient inventory management (Anthony & Reece, 2019).

References

  • Anthony, R. N., & Reece, J. S. (2019). Financial Accounting (13th ed.). McGraw-Hill Education.
  • Hepp, B. W., & McDaniel, B. (2020). Financial accounting: information for decisions. Cengage Learning.
  • Higgins, R. C., & Stewart, K. (2020). Financial Markets and Institutions. McGraw-Hill Education.
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2020). Intermediate Accounting (16th ed.). Wiley.
  • Romney, M. B., & Steinbart, P. J. (2019). Accounting Information Systems (14th ed.). Pearson.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2021). Financial Accounting Theory and Analysis. Wiley.
  • Stickney, C. P., Weil

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