Question 1

With increased computer technology, the ability to read and understand financial statements is no longer an important skill for managers.

Accepted Answer

A) True 
 B)False

Question 2

Debts owed by a business are called

Accepted Answer

A)  revenues. 
B)  liabilities. 
C)  equities. 
D)  assets. 
A)  revenues. 
B)  liabilities. 
C)  equities. 
D)  assets.

Question 3

Which of the following agencies would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Kentucky's Department of Transportation?

Accepted Answer

A)  Commission on Accounting Practices for State Governments 
B)  Government Accounting Standards Board 
C)  Independent Not-For-Profit Accounting Standards Board 
D)  Institute for Public Sector Accounting Standards 
A)  Commission on Accounting Practices for State Governments 
B)  Government Accounting Standards Board 
C)  Independent Not-For-Profit Accounting Standards Board 
D)  Institute for Public Sector Accounting Standards

Question 4

The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Kayla and Kingston run a shuttle service from Water Tower Place to Chicago O'Hare airport. Last month, they recorded the following:   Kayla and Kingston's gross profit for the past month was

Accepted Answer

A)  $682.00 
B)  Kayla: $341.00; Kingston: $341.00 
C)  $1250.00 
D)  $2750.00 
A)  $682.00 
B)  Kayla: $341.00; Kingston: $341.00 
C)  $1250.00 
D)  $2750.00

Question 6

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Accepted Answer

A) True 
 B)False

Question 7

The value of resources the firm owns, minus the amount of money the firm owes to others =

Accepted Answer

A)  liabilities. 
B)  liquidity. 
C)  leverage. 
D)  owners' equity. 
A)  liabilities. 
B)  liquidity. 
C)  leverage. 
D)  owners' equity.

Question 8

Given that measuring a firm's financial health is important to its survival, which of the following strategies is good advice for a person just starting a business?

Accepted Answer

A)  Create a method for keeping your books that makes sense to you. Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. 
B)  All transactions are important. Separating transactions only serves to create a perception that some transactions are of lesser importance than others. 
C)  Accounting systems used by big business are not suitable for small businesses. 
D)  Select an accounting system that helps you make decisions, and helps you report information to others outside your firm. 
A)  Create a method for keeping your books that makes sense to you. Outside agencies such as creditors and suppliers will not evaluate you by the way you keep books. 
B)  All transactions are important. Separating transactions only serves to create a perception that some transactions are of lesser importance than others. 
C)  Accounting systems used by big business are not suitable for small businesses. 
D)  Select an accounting system that helps you make decisions, and helps you report information to others outside your firm.

Question 9

Calvin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs. What job does Calvin hold?

Accepted Answer

A)  managerial accountant 
B)  financial accountant 
C)  tax accountant 
D)  auditor 
A)  managerial accountant 
B)  financial accountant 
C)  tax accountant 
D)  auditor

Question 10

Chloe is categorizing journal entries in order to post to the ________.

Accepted Answer

A)  income statement. 
B)  balance sheet. 
C)  working papers. 
D)  ledger. 
A)  income statement. 
B)  balance sheet. 
C)  working papers. 
D)  ledger.

Question 11

Jerome is an accountant employed full time by The Newport Company. Jerome is an example of a public accountant.

Accepted Answer

A) True 
 B)False

Question 12

Accountants record, classify, and ________ the results of the financial information they gather.

Accepted Answer

A)  interpret 
B)  sell 
C)  buy 
D)  change 
A)  interpret 
B)  sell 
C)  buy 
D)  change

Question 13

Lyell owns his own small business, but he doesn't want to be bothered with accounting information. He tells his friends, "All I need accounting for is to prepare my income tax return for my business. I'll hire someone to do that for me." Lyell's attitude would be disastrous if he managed a large firm, but it is a reasonable view for a small business owner.

Accepted Answer

A) True 
 B)False

Question 14

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Accepted Answer

A) True 
 B)False

Question 15

Eric holds a bachelor's degree in accounting and additional training in tax law. He is responsible for preparing tax returns and developing tax strategies for his employer, and has done so for the past seven years. Eric is a certified government accountant.

Accepted Answer

A) True 
 B)False

Question 16

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better pricing decisions.

Accepted Answer

A) True 
 B)False

Question 17

The financial ratios that measure a firm's ability to pay its short-term debts are called

Accepted Answer

A)  leverage ratios. 
B)  liquidity ratios. 
C)  equity ratios. 
D)  profitability ratios. 
A)  leverage ratios. 
B)  liquidity ratios. 
C)  equity ratios. 
D)  profitability ratios.

Question 18

Debts that are due in one year or less are classified on the balance sheet as

Accepted Answer

A)  current liabilities. 
B)  bonds payable. 
C)  callable bonds. 
D)  immediate expenses. 
A)  current liabilities. 
B)  bonds payable. 
C)  callable bonds. 
D)  immediate expenses.

Question 19

A(n) ________ is a yearly published statement of the financial condition, progress, and expectations of an organization.

Accepted Answer

A)  balance sheet 
B)  independent audit 
C)  mission statement 
D)  annual report 
A)  balance sheet 
B)  independent audit 
C)  mission statement 
D)  annual report

Question 20

An income statement reports what a company owns and owes on a certain day.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

With increased computer technology, the ability to read and understand financial statements is no longer an important skill for managers.

Debts owed by a business are called

Which of the following agencies would have the greatest impact on the methods used to record, classify, summarize, and interpret accounting information for the State of Kentucky's Department of Transportation?

The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Kayla and Kingston run a shuttle service from Water Tower Place to Chicago O'Hare airport. Last month, they recorded the following: Kayla and Kingston's gross profit for the past month was

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

The value of resources the firm owns, minus the amount of money the firm owes to others =

Given that measuring a firm's financial health is important to its survival, which of the following strategies is good advice for a person just starting a business?

Calvin works in the accounting department for a textbook publishing firm preparing budgets and reporting production costs. What job does Calvin hold?

Chloe is categorizing journal entries in order to post to the ________.

Jerome is an accountant employed full time by The Newport Company. Jerome is an example of a public accountant.

Accountants record, classify, and ________ the results of the financial information they gather.

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Eric holds a bachelor's degree in accounting and additional training in tax law. He is responsible for preparing tax returns and developing tax strategies for his employer, and has done so for the past seven years. Eric is a certified government accountant.

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better pricing decisions.

The financial ratios that measure a firm's ability to pay its short-term debts are called

Debts that are due in one year or less are classified on the balance sheet as

A(n) ________ is a yearly published statement of the financial condition, progress, and expectations of an organization.

An income statement reports what a company owns and owes on a certain day.

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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