What is the purpose of a double-entry system?

6. 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? 7. 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? 8. What kind of asset is created when a customer promises to pay at a future date for goods purchased from a business? a. Account payable b. Account receivable c. Notes payable d. Unearned revenue 9. How is ending cash for a period calculated? a. The cash disbursed in a given period b. Total cash receipts in a given period c. The sum of beginning cash and cash flow in a given period d. Cash receipts minus cash disbursements in a given period 10. What is a transaction? 11. If a business paid $150,000 in cash for a piece of land, how would the transaction be posted? Explain what the accounts involved are (asset, liability, or equity accounts). 12. What is an income statement, and what do income statements tell business managers? 13. What shortcoming does the percent-of-sales method for developing pro forma statements have for business planning? 14. What is the purpose of a double-entry system? 15. What is net new financing, and why is net new financing a critical part of financial planning?

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