Financial Acounting Midterm - 20780

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1.     Name and briefly describe each of the four financial statements.

        2.     Briefly distinguish between financial accounting and managerial accounting.

3.     Describe the difference between temporary and permanent accounts, and state which ones are closed. Describe the purpose of the closing process.

4.     Explain the meaning of the term, "matching concept."

        5.     Explain the significance of the return on equity ratio. Who (what category or type of financial statement users) would normally be most interested in this ratio?

6.     What is financial leverage? What financial ratio can be increased by using financial leverage?

7.     Discuss the major differences between a perpetual inventory system and a periodic inventory system.

8.     Why are cash discounts given, and who benefits by these discounts?

9.     Define the terms FIFO and LIFO.

10.  List the specific steps used in computing the estimated inventory balance using the gross margin method.

11.  List the measures that a business can use to achieve strong internal controls.

12.  Petty cash funds are maintained on an imprest basis. Explain the advantage of using the imprest basis in accounting for petty cash.

13.  Rolla Company was founded in 2010. It acquired $30,000 cash by issuing stock to investors and an additional $20,000 cash by borrowing from creditors. During 2010 it received $15,000 cash revenues and paid $22,000 in cash expenses. The company then went out of business.What amount of cash should Rolla Company have had on hand immediately before going out of business?

14.  Why would a merchandising company need good internal controls related to its inventory?

15.  Explain the term, "business liquidation."

16.  List the key elements of an internal control system that would apply to inventory, and explain how each of them does relate to inventory

17.  What is the purpose of closing entries?

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