Question 1

The accounting profession is divided into 5 key working areas, two of which are

Accepted Answer

A)  auditing and managerial accounting. 
B)  forecasting and logistical accounting. 
C)  inventory control and budgeting. 
D)  income accounting and expenditure accounting. 
A)  auditing and managerial accounting. 
B)  forecasting and logistical accounting. 
C)  inventory control and budgeting. 
D)  income accounting and expenditure accounting.

Question 2

Liabilities are reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 3

Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices.

Accepted Answer

A) True 
 B)False

Question 4

The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.

Accepted Answer

A) True 
 B)False

Question 5

Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?

Accepted Answer

FIFO stands for first-in, first-out. Thi

Question 6

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals

Accepted Answer

A)  net income. 
B)  gross margin. 
C)  owners' equity. 
D)  cash reserves. 
A)  net income. 
B)  gross margin. 
C)  owners' equity. 
D)  cash reserves.

Question 7

A basic difference between managerial accounting and financial accounting is that managerial accounting

Accepted Answer

A)  adheres to rules set by the GASB, while financial accounting uses a different group of rules set by the FASB. 
B)  involves the preparation of the balance sheet and income statement while financial accounting involves the preparation of the statement of cash flows. 
C)  handles recording and classifying information about transactions that have no direct financial impact on the firm, while financial accounting handles the recording and classifying of information about transactions that do have a financial impact. 
D)  provides information primarily intended for managers and others inside the company, while financial accounting provides information primarily intended for people outside the organization. 
A)  adheres to rules set by the GASB, while financial accounting uses a different group of rules set by the FASB. 
B)  involves the preparation of the balance sheet and income statement while financial accounting involves the preparation of the statement of cash flows. 
C)  handles recording and classifying information about transactions that have no direct financial impact on the firm, while financial accounting handles the recording and classifying of information about transactions that do have a financial impact. 
D)  provides information primarily intended for managers and others inside the company, while financial accounting provides information primarily intended for people outside the organization.

Question 8

Harrison, a potential investor, is interested in both Barkatorium's balance sheet and income statement when evaluating whether or not to invest.

Accepted Answer

A) True 
 B)False

Question 9

When valuing items in inventory for financial reporting purposes, generally accepted accounting principles (GAAP) requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first.

Accepted Answer

A) True 
 B)False

Question 10

The two major classes of operating expenses are current expenses and long-term expenses.

Accepted Answer

A) True 
 B)False

Question 11

The purpose of a trial balance is to

Accepted Answer

A)  affirm whether the figures in the account ledgers are correct and balanced. 
B)  prepare a mockup of a real balance sheet. 
C)  review the income statement accounts. 
D)  meet a reporting requirement of the Securities and Exchange Commission (SE
C) . 
A)  affirm whether the figures in the account ledgers are correct and balanced. 
B)  prepare a mockup of a real balance sheet. 
C)  review the income statement accounts. 
D)  meet a reporting requirement of the Securities and Exchange Commission (SE
C) .

Question 12

General expenses include office salaries, rent, and insurance.

Accepted Answer

A) True 
 B)False

Question 13

________ is the accounting practice of recording each transaction in two places in the accounting journal.

Accepted Answer

A)  Double-entry bookkeeping 
B)  Trial balancing 
C)  Account matching 
D)  Entry duplication 
A)  Double-entry bookkeeping 
B)  Trial balancing 
C)  Account matching 
D)  Entry duplication

Question 14

When creating the income statement, which of the following statements is accurate?

Accepted Answer

A)  revenues, minus general operating expenses = gross profit. 
B)  revenues, minus tax expense = gross profit. 
C)  revenues, minus depreciation expense = gross profit. 
D)  revenues, minus cost of goods sold = gross profit. 
A)  revenues, minus general operating expenses = gross profit. 
B)  revenues, minus tax expense = gross profit. 
C)  revenues, minus depreciation expense = gross profit. 
D)  revenues, minus cost of goods sold = gross profit.

Question 15

Patents and copyrights are examples of intangible assets.

Accepted Answer

A) True 
 B)False

Question 16

Assets are listed on the balance sheet in order of liquidity, with the most liquid assets listed first.

Accepted Answer

A) True 
 B)False

Question 17

Ronnecker Construction has several trucks that are used in the business. Recently, the owners were told that even though the government permits the firm to depreciate the vehicles, it is not a deductible expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 18

Accounting involves both the recording and the interpreting of financial events.

Accepted Answer

A) True 
 B)False

Question 19

The fundamental accounting equation states: Assets = ________.

Accepted Answer

A)  liabilities minus owners' equity 
B)  liabilities plus receivables 
C)  payables plus cash equivalents 
D)  liabilities plus owners' equity 
A)  liabilities minus owners' equity 
B)  liabilities plus receivables 
C)  payables plus cash equivalents 
D)  liabilities plus owners' equity

Question 20

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

The accounting profession is divided into 5 key working areas, two of which are

Liabilities are reported on the income statement.

Jeremy thinks his business will be successful as long as he just keeps his customers satisfied. He does NOT need to have a great deal of knowledge about accounting practices.

The best way for a firm to avoid serious cash flow problems is to sustain a rapid growth in sales.

Identify and explain the differences between LIFO and FIFO inventory valuation methods. What would be the difference in gross margin using FIFO versus LIFO?

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals

A basic difference between managerial accounting and financial accounting is that managerial accounting

Harrison, a potential investor, is interested in both Barkatorium's balance sheet and income statement when evaluating whether or not to invest.

When valuing items in inventory for financial reporting purposes, generally accepted accounting principles (GAAP) requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first.

The two major classes of operating expenses are current expenses and long-term expenses.

The purpose of a trial balance is to

General expenses include office salaries, rent, and insurance.

________ is the accounting practice of recording each transaction in two places in the accounting journal.

When creating the income statement, which of the following statements is accurate?

Patents and copyrights are examples of intangible assets.

Assets are listed on the balance sheet in order of liquidity, with the most liquid assets listed first.

Ronnecker Construction has several trucks that are used in the business. Recently, the owners were told that even though the government permits the firm to depreciate the vehicles, it is not a deductible expense on the income statement.

Accounting involves both the recording and the interpreting of financial events.

The fundamental accounting equation states: Assets = ________.

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

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

Filters