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Closing revenue and expense accounts at the end of the accounting period serves to make the revenue and expense accounts ready for use in the next period.

Financial accounting is the area of accounting aimed at serving external users by providing them with general-purpose financial statements.

An account used to record stockholders’ investments in a business is called a(n):

Income Summary is a temporary account only used for the closing process.

Before an adjusting entry is made to accrue employee salaries, Salaries Expense and Salaries Payable are both understated.

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.

Accrued expenses reflect transactions where cash is paid before a related expense is recognized.

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

The indirect method separately lists each major item of operating cash receipts and cash payments.

Graphical analysis of the balance sheet can be useful in assessing sources of financing.