Question 1

Assets are economic resources that are owned by a firm.

Accepted Answer

A) True 
 B)False

Question 2

Valeria, owner of Coolest Closet, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Accepted Answer

A)  management accounting 
B)  financial accounting 
C)  tax accounting 
D)  certified bookkeeping 
A)  management accounting 
B)  financial accounting 
C)  tax accounting 
D)  certified bookkeeping

Question 3

Isabel created Waterfront Sports at a nearby lake resort. She wanted to combine her accounting degree with her love of the outdoors and kayaking. One of her first business purchases was a computerized accounting program. She learned in her college classes that a good software system will eliminate accounting cycle steps and the time it takes for her to interpret the results. As she put it, "It should make the decisions for me!"

Accepted Answer

A) True 
 B)False

Question 4

The main reason an accountant would conduct a trial balance is to

Accepted Answer

A)  determine whether account figures in the ledger are correct and balanced. 
B)  obtain an estimate of the amount of taxes the firm owes. 
C)  ensure the audit was done correctly. 
D)  verify the validity of last year's balance sheet before beginning the next accounting cycle. 
A)  determine whether account figures in the ledger are correct and balanced. 
B)  obtain an estimate of the amount of taxes the firm owes. 
C)  ensure the audit was done correctly. 
D)  verify the validity of last year's balance sheet before beginning the next accounting cycle.

Question 5

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 6

There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and governmental and not-for-profit accounting.

Accepted Answer

A) True 
 B)False

Question 7

One of the key financial statements prepared in the fifth step of the accounting cycle is

Accepted Answer

A)  general journal. 
B)  statement of cash flows. 
C)  asset summary. 
D)  social audit. 
A)  general journal. 
B)  statement of cash flows. 
C)  asset summary. 
D)  social audit.

Question 8

Accountants not only provide financial information to the firm, they

Accepted Answer

A)  replace the firm's need for managers. 
B)  provide information regarding competitors. 
C)  assist in interpreting that information. 
D)  design the computer information systems. 
A)  replace the firm's need for managers. 
B)  provide information regarding competitors. 
C)  assist in interpreting that information. 
D)  design the computer information systems.

Question 9

Tracy wants to start her own business, but knows little about how to set up an accounting system or interpret financial information. "I'm not worried about accounting," she tells her friends. "I'll just hire a part-time bookkeeper to handle all that type of stuff, and focus my attention on what I like-finding ways to satisfy my customers." Which of the following is the best response to Tracy's comments?

Accepted Answer

A)  Fine. Just make sure the bookkeeper you hire knows how to use a database, since this type of software is the heart of any efficient accounting system. 
B)  Although you can hire someone to keep your books, you'll still need to know how to read, understand, and interpret basic accounting reports in order to make good business decisions. 
C)  Most entrepreneurs would agree with your opinion. The work done by accountants is mainly clerical in nature, so time spent by business owners on accounting tends to take them away from more important tasks. 
D)  You have a good plan. Only managers of large firms require knowledge of accounting. Owners and managers of small businesses can easily get by with just a part-time bookkeeper. 
A)  Fine. Just make sure the bookkeeper you hire knows how to use a database, since this type of software is the heart of any efficient accounting system. 
B)  Although you can hire someone to keep your books, you'll still need to know how to read, understand, and interpret basic accounting reports in order to make good business decisions. 
C)  Most entrepreneurs would agree with your opinion. The work done by accountants is mainly clerical in nature, so time spent by business owners on accounting tends to take them away from more important tasks. 
D)  You have a good plan. Only managers of large firms require knowledge of accounting. Owners and managers of small businesses can easily get by with just a part-time bookkeeper.

Question 10

What is ratio analysis? Explain the four different types of ratios and how each is used.

Accepted Answer

Ratio analysis is the assessment of a fi

Question 11

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Accepted Answer

A) True 
 B)False

Question 12

Budget preparation is one aspect of managerial accounting.

Accepted Answer

A) True 
 B)False

Question 13

Ivy is a bookkeeper for the Newport Corporation. She takes the firm's transactions and records them in a record book or computer program referred to as

Accepted Answer

A)  a credit account. 
B)  an asset database. 
C)  a journal. 
D)  a debit program. 
A)  a credit account. 
B)  an asset database. 
C)  a journal. 
D)  a debit program.

Question 14

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

Financial ratios are used to analyze a firm's financial condition and financial performance.

Accepted Answer

A) True 
 B)False

Question 16

Money received from tickets sold for the Taylor Swift concert is recorded as net income on the concert promoter's income statement.

Accepted Answer

A) True 
 B)False

Question 17

A bookkeeper's first task is to

Accepted Answer

A)  separate all of the firm's transactions into meaningful categories. 
B)  prepare the firm's financial statements. 
C)  summarize the firm's financial data. 
D)  interpret and report data to the firm's management. 
A)  separate all of the firm's transactions into meaningful categories. 
B)  prepare the firm's financial statements. 
C)  summarize the firm's financial data. 
D)  interpret and report data to the firm's management.

Question 18

At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

Accepted Answer

A) True 
 B)False

Question 19

Sophie has been a bookkeeper for a small chain of boutiques for nearly four years. Six months ago, the manager retired and a new manager was brought in. The new manager routinely asks her for information and advice about how to interpret the information she records. Sophie's experience as a bookkeeper means she is qualified to provide this type of advice.

Accepted Answer

A) True 
 B)False

Question 20

Purchasing insurance, paying employees, and using supplies are examples of financial transactions.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Assets are economic resources that are owned by a firm.

Valeria, owner of Coolest Closet, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders?

The main reason an accountant would conduct a trial balance is to

The purpose of liquidity ratios is to indicate the degree to which a firm relies on borrowed funds in its operations.

There are five key working areas in accounting: financial accounting, managerial accounting, auditing, tax accounting, and governmental and not-for-profit accounting.

One of the key financial statements prepared in the fifth step of the accounting cycle is

Accountants not only provide financial information to the firm, they

What is ratio analysis? Explain the four different types of ratios and how each is used.

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Budget preparation is one aspect of managerial accounting.

Ivy is a bookkeeper for the Newport Corporation. She takes the firm's transactions and records them in a record book or computer program referred to as

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Financial ratios are used to analyze a firm's financial condition and financial performance.

Money received from tickets sold for the Taylor Swift concert is recorded as net income on the concert promoter's income statement.

A bookkeeper's first task is to

At present, accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

Purchasing insurance, paying employees, and using supplies are examples of financial transactions.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Managing Personal Finances

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