The Preparation of Financial Statements for People Outside the Firm

question 127

Multiple Choice

The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of

• A) auditing.
• B) financial accounting.
• C) managerial accounting.
• D) cost accounting.

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Definitions:

Drawing Account

A drawing account is used to track the money or goods withdrawn by the business owner for personal use from the business.

Net Loss

The amount by which total expenses exceed total revenues in a business, indicating a negative financial performance over a specific period.

Income Statement Columns

This refers to the structured segments in an income statement or profit and loss account, showing revenues, expenses, and profits or losses of an entity over a specific period.

Debit Column

is a section in accounting records where increases in asset and expense accounts or decreases in liability, equity, and revenue accounts are entered.