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Pricing Schools Business

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Financial Statements and Accrual Accounting

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Financial Statements and Accrual Accounting

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Questions and Answers

What method of accounting is universally used in business today?

Double-entry accounting

Accrual accounting (correct)

Fund accounting

Cash accounting

Where are transactions recorded as they happen in a business?

Accounting journals and ledgers (correct)

Income statement

Balance sheet

Checkbook

What does the income statement summarize?

Cash inflows and outflows

Net worth of a business

Incomes and expenses for a period of time (correct)

Assets and liabilities

Which financial statement shows how much cash came in and where it came from?

Cash flow statement (C) Signup and view all the answers

Which accounting method recognizes transactions only when cash is exchanged?

Cash accounting (C) Signup and view all the answers

What is the process through which the financial situation is recorded in accounting?

Bookkeeping (A) Signup and view all the answers

What is the main difference between operating, investing, and financing cash flows?

The nature of the activities generating the cash flows (C) Signup and view all the answers

What is the accounting equation that must always hold true?

Assets = Liabilities + Equity (A) Signup and view all the answers

What is the cash flow available to make investment decisions after operations and debt repayments are taken care of?

Free cash flow (A) Signup and view all the answers

What represents a snapshot of assets, debts, and equity at a specific point in time?

Balance sheet (D) Signup and view all the answers

What do assets, liabilities, and equity represent in the accounting equation?

Current financial standing (A) Signup and view all the answers

Which financing option is considered when the accounting equation is in balance?

Taking on more debt (D) Signup and view all the answers