A Technique for Evaluating Financial Statements That Expresses the Relationship

question 3

Multiple Choice

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is

• A) common size analysis.
• B) horizontal analysis.
• C) ratio analysis.
• D) vertical analysis.

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Definitions:

Adjusting Journal Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.

Insurance Expense

The cost attributed to procuring insurance for business operations, properties, liability, and other risk management purposes, treated as an expense on the income statement.

Prepaid Insurance

An asset account representing insurance payments made in advance for coverage that extends to future periods.

Accrued Revenue

Revenue that has been earned but not yet received in cash or recorded, representing goods or services provided to a customer in one accounting period that are paid for in a later period.