ACCOUNTING APPLICATION QUESTIONS Please get a marker board. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #1 • Sheldon prepares, examines, and analyzes financial reports to assess accuracy, completeness, and conformance to reporting and procedural standards. He is strong in math and good at paying attention to details without being distracted. He uses Intuit QuickBooks to do most of his work. What is Sheldon’s job title? • Accountant © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #2 • Lark is categorizing financial claims for her business. She has been given the following list and must identify them as an asset, liability, and owner’s equity. 1. Accounts receivable • Asset 2. Accounts payable • Liability 3. Land • Asset 4. Business Loan • Liability © 2017 Business Girl. All Rights Reserved. 5. Machinery • Asset 6. Mortgage • Liability 7. Furniture • Asset 8. Equipment • Asset 9. Lark, Capital • Owner’s Equity APPLICATION QUESTION #3 • Olivia is a college student majoring in marketing. She is reading through the course catalog and sees she must take Accounting I as part of her course work. She schedules a meeting with her counselor to ask why she must take accounting. What do you think her counselor will tell her? • Accounting is often called the “language of business.” • Everyone involved in a business should understand the basics of accounting. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #4 • Bankers usually insist that prospective borrowers submit audited financial statements along with a loan application. Why should financial statements be audited by a CPA? • To ensure there are no inaccuracies before the lender issues the loan. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #5 • Name the 3 financial statements. • Income Statement • Statement of Cash Flows • Balance Sheet • Do the financial statements contain all of the information you might want as a potential lender? What other information would you like to examine? • No, I would want more information about a company I lend money to. This could include, but is not limited to: performance track record, the business plan, future forecast, etc. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #6 • Sarah is looking at a financial statement that shows the flow of revenues (amounts earned from business activity) and expenses (amounts paid in the course of operations) over a year. Which financial statement is she looking at? How do you know? • Income Statement • It mentions revenue and expenses. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #7 • Leonard is looking at a statement that details the movement of cash through the organization over a quarter. Leonard sees that cash is entering and leaving the company by means of operation, investing, and financing. Which financial statement is Leonard looking at? How do you know? • Statement of Cash Flows • Leonard is looking at cash movement. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #8 • Haddie is looking at a financial statement that reports how much cash is in the bank, what is owed to creditors, and the value of the company’s assets. Which financial statement is she looking at? How do you know? • Balance Sheet • Assets, liabilities, and owner’s equity are the essential components of a balance sheet. • How do you know if the balance sheet is correct? • Accounting Equation • What formula is used? • Assets= Liabilities + Owner’s Equity © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #9 • Barney has an internship at Admiral Inc. His mentor mentions pre-paid expenses, inventory, and accounts receivable. What is the term for these claims? • Current Assets • Barney’s mentor sends him to get the financial statement with this information from the accounting team to take to a meeting. Which financial statement is Barney going to get? • Balance Sheet © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #10 • Riona is having trouble managing the financial records for a small business. She does everything with pen and paper. Do you believe this is the best tool to manage the business’s finances? Why or why not? • No, she is human and may make mistakes when using this system. • What other options are there for managing financial records? • There are numerous electronic programs out there that could be very effective and improve efficiency of record keeping. Examples include: QuickBooks, Sage, Xero, Zoho Books, FreeAgent, FreshBooks, etc. © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #11 • Companies such as Enron, Waste Management, and WorldCom have gotten in trouble for keeping huge debts off the balance sheet, falsely increasing depreciation on the balance sheet, or inflating revenues. Why do you think these companies were willing to commit fraud? What ramifications can these individuals face for their actions? • Answers may vary. Possibly greed, lack of ethics, arrogance, belief that they won’t get caught, to increase amount of investors, high stakes, etc. • Fines, prison time, class-action suit, losing your job © 2017 Business Girl. All Rights Reserved. APPLICATION QUESTION #12 • Judge the value of ethical behavior in accounting. Why is ethical behavior valuable? • Answers may vary. Possible responses: If your business is known to be unethical it would be difficult to attract investors or lenders. Additionally, unethical employees may lose their job, face jail time, or fines. • If you were hiring a new accountant for a business called Knox Water Works, what qualities would you look for in the employee? How would you assess this quality? • Honesty, trustworthy, integrity, etc. • Ask scenario based questions, ask about past experiences, etc. © 2017 Business Girl. All Rights Reserved.
