Ch4 The Accounting Cycle

2. What is the primary purpose of financial accounting?
A. Determine the amount of tax liability owed to the government.
B. Communicate business transactions to internal management.
C. Measure business transactions and communicate those measures to external users to make decisions.
D. Measure the profitability of the company in order to assist employees with making decisions. – C. Measure business transactions and communicate those measures to external users to make decisions.
accounts receivable ledger – A subsidiary ledger containing only accounts for charge customers
A language of business employed to communicate financial information based upon the recording, classification, summarization, and interpretation of financial data is called – Accounting
LIFO – Last In First Out; assumes company always sells the most recent items purchased; ending inventory contains the oldest items purchased
financing activities – activities that obtain from investors and creditors the cash needed to launch and sustain a business; a section of the statement of cash flows.
debit – the left side of an account
Debit – The left side of an account
A Trial Balance will not balance if:
Over the short run, a nonlinear cost function would MOST likely result from all of the following EXCEPT:
a. quantity discounts for each additional 10,000 parts purchased
b. purchasing another $250,000 printing machine to double production
c. hiring a third production supervisor
d. incurring greater total utility costs for each machine-hour of operation – d. incurring greater total utility costs for each machine-hour of operation
FICA taxes – based on the Federal Insurance Contributions Act. Tax withheld from employees paychecks
General Ledger – A permanent, classified record of all accounts used in a firm's operation; a record of final entry.
Adjusted trial balance debit and balance sheet debit – In a worksheet, Inventory is shown in the following columns
A Triаl Bаlаnce will nоt balance if:
Account Title – A name given to an account
financial statements – reports that summarize the effects of events in a business

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