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Date .

Chapter 20 Test

Accounting and Financial Reporting

A. Match each definition in the left column with the correct term from the right column. Write the letter of
the term in the space provided.

_____ 1. Your year begins and ends in months other than
the calendar year
_____ 2. Total amount of assets minus total liabilities
_____ 3. A financial statement that tells what a business is
worth at any given time
_____ 4. Where sales on account are posted
_____ 5. The list of accounts a business uses in its operation
_____ 6. A financial report that shows how much a business
has earned or lost during the accounting period
_____ 7. Amount of cash available
_____ 8. Debts of the business


Chart of accounts
Income statement
Cash flow
Balance sheet
Sales journal
Owners equity
Fiscal year

B. In the space at the left, write the letter of the choice that best completes the statement or answers the

_____ 9. All U.S. businesses use this system for accounting.
a. credit union guidelines

b. trade credit agency rules

_____ 10. These statements summarize the results of your business operation and provide a picture of its

financial position.
a. financial reports

c. accounts payable reports
b. current asset journals

d. owners equity documents
_____ 11. Anything of value that a business owns is called a(n)
a. curtail liabilities.

c. liability.
b. fixed costs.

d. asset.
_____ 12. The amount your business owes to creditors is the
a. variable costs.

c. owners equity.
b. assets.

d. accounts payable.
_____ 13. Posting to this will keep your account balances accurate.
a. Income statement

c. general ledger
b. Pro forma income statement
d. ratio analysis report

C. In the space provided, write the word (or words) from the list that will best complete each statement.


Accounting p eriod



Income statement

owners equity

14. The ________________________ can be a month or quarter, but the most common is a year.

15. Complete this formula: assets = ____________ + owners equity

16. Most business use a ____________________ accounting system in which each business transaction affects
two or more accounts. These changes are identified by entering _______________ and ______________.

D. Write a paragraph that answers this question.

17. Discuss the three primary financial statements and their purposes.

E. Use the blank check below to answer the following questions.

18. Write a check to Starbucks for $10.67 worth of coffee that you bought today.

19. What is the check number? ______________________________________