1. If a business calculated the balance in the Accounts Payable T-account that should always have a credit balance but instead had a debit balance, what would this indicate?
2. During the financial planning process, if a business learns from its balance sheets that its liabilities and equity are substantially greater than its assets, what choices does the business have to deal with the difference keeping in mind assets should be in balance with liabilities and equity?
3. What is the “economic entity assumption” in managerial accounting?
4. Cash budgets are prepared for a period of a month. In addition to monthly cash budgets, where else should business managers look to ensure cash is available for paying bills as they come due throughout the month?
5. When a manager builds a “model” for business planning, what exactly is the manager doing?
6. Define “equity” as used in managerial accounting and explain how liabilities relate to equity.
7. What is an income statement, and what do income statements tell business managers?
8. What is a chart of accounts?
9. What shortcoming does the percent-of-sales method for developing pro forma statements have for business planning?
10. If a business received $6,000 in revenue for services it sold for cash, how would the transaction be posted? Explain what the accounts involved are (asset, liability, or equity accounts).
