Question 1: Accounting is sometimes described as the language of business. What is meant by this description?
Question 2: What do we mean when we say that an accounting system needs to be cost-effective?
Question 3: In broad general terms, what is the purpose of accounting?
Question 4: Explain briefly why each of the following groups might be interested in the financial statements of a business:
Question 5: At the beginning of the year, the Office Equipment account of Gulf Coast Airlines had a debit balance of $126,900. During the year, debit entries of $23,400 and credit entries of $38,200 were posted to the account. What was the balance of this account at the end of the year? (Indicate debit or credit balance.)
Office Equipment
Debit l Credit
$ 126,900
$ 23,400
$38,200
$ 112,100
The balance at the end of the year is $112,100 (debit balance)
Question 6: What is the meaning of the term expenses? Does the payment of cash by a business indicate that an expense has been incurred? Explain.
Question 7: Do adjusting entries affect income statement accounts, balance sheet accounts, or both? Explain.
Question 8: Why does the purchase of a one-year insurance policy four months ago give rise to insurance expense in the current month?
Question 9: Some people think that a company's retained earnings represent cash reserved for the payment of dividends. Are they correct? Explain.
Question 10: How does depreciation expense differ from other operating expenses?