Quiz AC-14 - 11. Question: Which one of the following items...

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11. Question: Which one of the following items found on a balance sheet is not a claim against an entity's resources? Hint: Remember what general classes of items constitute claims against resources. Also, consider what the term "resources" means. Your Answer: Merchandise Inventory ( CORRECT. Merchandise Inventory is considered an asset that, when sold, provides revenue for the corporation. It is not viewed as a claim against resources or assets. ) CORRECT Notes Payable ( Incorrect. Since Notes Payable is a liability, it represents a claim against resources or assets. ) Accounts Payable ( Incorrect. Since Accounts Payable is a liability, it represents a claim against resources or assets. ) Capital ( Incorrect. Since Capital is an owner's equity item, it represents a claim against resources or assets. ) Points Received: 1 of 1 Comments: 12. Question: Financial statements provide information about the performance of the company in the past. Why is this information relevant in business decision-making? Your Answer: Companies always perform at least as well as they have in the past. Historical performance provides information for projections of future performance. CORRECT The financial statements show the best that the company can be expected to perform. The financial statements are not relevant for current decision-making. Instructor Explanation: Users of financial statements should not assume that past performance is exactly how the company will perform in the future, but financial statements provide an important perspective to project future performance. Points Received: 1 of 1 Comments: 13. Question: A Generally accepted accounting principles Your Answer: are advisory guidelines for management are only applicable to balance sheets are to be followed in the preparation of financial statements CORRECT can never be deviated from are uniform world-wide Instructor Explanation: GAAP is enforced by the SEC for public companies, but private companies, expecially small businesses, may produce financial statements using modifications of
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This note was uploaded on 06/20/2010 for the course FINA 6266 taught by Professor Burt during the Spring '10 term at University of Arkansas for Medical Sciences.

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Quiz AC-14 - 11. Question: Which one of the following items...

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