1) When a company has net income, what happens to its stockholders' equity, its assets, and/or its liabilities?

2) Is accrual accounting more closely related to a company's goal of profitability or liquidity?

3) Would you expect net income to be a good measure of a company's liquidity? Why or why not?

Chapter 4

1) How do the four basic financial statements meet the stewardship objective of financial reporting?

2) When might an amount be material to management but not to the CPA auditing the financial statements?

3) Why is it important to compare a company's financial performance with industry standards?

). Why is a physical inventory needed under both the periodic and perpetual inventory systems?

2) Which is a better measure of a company's performance - income from operations or net income?

3) Suppose you sold goods to a company in Europe at a time when the exchange rat for the dollar was declining in relation to the euro. Woud you want the European company to pay you in dollars or euros/ Why?