ACCT 301 Week 4 Midterm

Page 1 

1. (TCO 1) Suppose your company sold $25,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation? (Points : 12)              2. (TCO 2) Suppose your company sold $50,000 in merchandise to a customer for cash. How does this transaction impact the accounting equation? (Points : 12)              3. (TCO 3) Rationalization is one of the components of the fraud triangle. What types of rationalization could a person use to justify misconduct? How can a company protect itself from rationalization as a part of fraud? (Points : 12)              4. (TCO 4) What is horizontal analysis of financial statements? How does horizontal analysis differ from vertical analysis? (Points : 12)

  

Page 2 

1. (TCO 3) Separation of duties is a key feature in an internal control system. Why is separation of duties such an important internal control? Give an example of separation of duties as an internal control. (Points : 24)              2. (TCO 1) Describe the balance sheet. Why is this statement important to the company, creditors, and investors? (Points : 24)              3. (TCO 4) Name and describe one liquidity ratio. What does this ratio measure? What is the formula for this ratio? (Points : 24)