When Nathan Applied for a Loan to Expand His Sailboat

question 12

Multiple Choice

When Nathan applied for a loan to expand his sailboat business, the bank required that his financial statements be carefully examined by a CPA. The bank is requiring Nathan to have his financial statements

• A) verified.
• B) audited.
• C) affirmed.
• D) certified.
• E) insured.

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Definitions:

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Adjusting Entries

Journal entries made in accounting records at the end of an accounting period to update account balances before preparing financial statements.

Net Income

The residual financial benefit a company experiences after expenses and taxes are subtracted from its income.

Fiscal Year

A 12-month period used for accounting and financial reporting purposes, which may or may not align with the calendar year.