The Chart of Accounts Classifies the Accounts to Make Identification

question 82

Multiple Choice

The chart of accounts classifies the accounts to make identification of the accounts easier. This is done by way of assigning a number to each account. The first number identifies the classification of the type of account. Which of the following indicates the use of this classification?

• A) 1-Assets, 2-Liabilities, 3-Stockholders' Equity, 4-Expenses, 5-Revenues
• B) 1-Assets, 2-Liabilities, 3-Stockholders' Equity, 4-Revenues, 5-Expenses
• C) 1-Assets, 2-Stockholders' Equity, 3-Revenues, 4-Expenses, 5-Dividends
• D) 1-Stockholders' Equity, 2-Dividends, 3-Revenues, 4-Expenses

---

Definitions:

Payables-To-Sales Ratio

A financial metric that analyzes the relationship between a company's total payables and its total sales.

Net Operating Working Capital

A financial metric that highlights a firm's operational liquidity by subtracting current liabilities (excluding short-term debt) from current assets.

Current Ratio

A financial metric quantifying a firm's capability to fulfill its short-term liabilities with its present assets.

Aging Schedule

Breaks down accounts receivable according to how long they have been outstanding. This gives the firm a more complete picture of the structure of accounts receivable than that provided by days’ sales outstanding.