When Evaluating the Financial Data of a Business You Are

question 80

Multiple Choice

When evaluating the financial data of a business you are considering purchasing, which issue(s) should you look for?

• A) Understated income in an effort to minimize taxes
• B) Unrealistically reduced levels of advertising cost
• C) Business expenses related to personal use of vehicles
• D) All of the Above

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Definitions:

Outstanding Checks

Checks that have been written and recorded in the issuing party's account but have not yet been cashed or cleared by the bank.

Reconciliation Procedure

A process used to ensure that two sets of records (usually the balances of two accounts) are in agreement, identifying discrepancies and reasons for them.

Internal Control

Internal control constitutes the procedures and mechanisms implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.

Cash Disbursements Procedure

A systematic method followed by a business to process and document the outflow of cash for various expenditures.