Question 1

Which of the following is an example of a financial transaction?

Accepted Answer

A)  A firm purchases a fire insurance policy. 
B)  An internal auditor discovers an error in a firm's inventory valuation. 
C)  A potential customer accesses a firm's web page. 
D)  A manager reviews the financial statements prepared by an accountant. 
A)  A firm purchases a fire insurance policy. 
B)  An internal auditor discovers an error in a firm's inventory valuation. 
C)  A potential customer accesses a firm's web page. 
D)  A manager reviews the financial statements prepared by an accountant.

Question 2

In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

Accepted Answer

A) True 
 B)False

Question 3

Company resources that are purchased with the intention that they will convert to cash within one year are

Accepted Answer

A)  fixed assets 
B)  current liabilities 
C)  current assets 
D)  owners' equity 
A)  fixed assets 
B)  current liabilities 
C)  current assets 
D)  owners' equity

Question 4

Accounting software has proven to be especially helpful for small-business owners.

Accepted Answer

A) True 
 B)False

Question 5

Marshall Manufacturing has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet. This payment will be due to the supplier in less than a year.

Accepted Answer

A) True 
 B)False

Question 6

A bookkeeper's first task is to record the firm's transactions in a journal.

Accepted Answer

A) True 
 B)False

Question 7

________ refers to how quickly an asset can be converted into cash.

Accepted Answer

A)  Liquidity 
B)  Velocity 
C)  Fundability 
D)  Accessibility 
A)  Liquidity 
B)  Velocity 
C)  Fundability 
D)  Accessibility

Question 8

A lower than average inventory turnover ratio indicates excellent inventory management practices.

Accepted Answer

A) True 
 B)False

Question 9

An accountant who works for a single business or government agency is referred to as a

Accepted Answer

A)  public accountant. 
B)  private accountant. 
C)  certified accountant. 
D)  commission accountant. 
A)  public accountant. 
B)  private accountant. 
C)  certified accountant. 
D)  commission accountant.

Question 10

As a first step in the accounting cycle, ________ involves the recording of business transactions.

Accepted Answer

A)  marketing 
B)  bookkeeping 
C)  auditing 
D)  economics 
A)  marketing 
B)  bookkeeping 
C)  auditing 
D)  economics

Question 11

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

Accepted Answer

A) True 
 B)False

Question 12

The ________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

Accepted Answer

A)  double-entry method 
B)  financial management process 
C)  financial performance appraisal 
D)  accounting cycle 
A)  double-entry method 
B)  financial management process 
C)  financial performance appraisal 
D)  accounting cycle

Question 13

A comparison of bookkeeping and accounting indicates that

Accepted Answer

A)  the two are virtually the same in practice. 
B)  bookkeeping involves recording financial information, while accounting is concerned with classifying, summarizing, and interpreting this information. 
C)  bookkeeping is more useful for small businesses while accounting is more useful for large businesses. 
D)  accounting is a subsystem of the process of bookkeeping. 
A)  the two are virtually the same in practice. 
B)  bookkeeping involves recording financial information, while accounting is concerned with classifying, summarizing, and interpreting this information. 
C)  bookkeeping is more useful for small businesses while accounting is more useful for large businesses. 
D)  accounting is a subsystem of the process of bookkeeping.

Question 14

A(n) ________ provides accounting services to individuals or firms on a fee basis.

Accepted Answer

A)  contract accountant 
B)  account agent 
C)  public accountant 
D)  independent accountant 
A)  contract accountant 
B)  account agent 
C)  public accountant 
D)  independent accountant

Question 15

Damian, a recent college graduate with a degree in accounting, is helping a newly formed construction company set up its accounting system. Although the company had purchased accounting software, Damian wants to make certain that future reports will distinguish between current liabilities and long-term liabilities. In the future, he will need to know the amount of total current liabilities in order to

Accepted Answer

A)  know when it is time to make a long-term mortgage payment. 
B)  calculate if the company has purchased too much inventory for home building. 
C)  analyze whether the company can afford to make capital purchases such as additional land acquisition. 
D)  analyze whether the company has enough funds to pay the near-term bills. 
A)  know when it is time to make a long-term mortgage payment. 
B)  calculate if the company has purchased too much inventory for home building. 
C)  analyze whether the company can afford to make capital purchases such as additional land acquisition. 
D)  analyze whether the company has enough funds to pay the near-term bills.

Question 16

A journal is where the initial record of a day's transactions is entered.

Accepted Answer

A) True 
 B)False

Question 17

Earnings per share, return on sales, and return on equity are examples of

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

Which of the following would be classified as a general expense on an income statement?

Accepted Answer

A)  salaries paid to salespeople 
B)  dividends paid to stockholders 
C)  payments made for insurance 
D)  costs associated with an advertising campaign 
A)  salaries paid to salespeople 
B)  dividends paid to stockholders 
C)  payments made for insurance 
D)  costs associated with an advertising campaign

Question 19

The inventory turnover ratio for all firms should be greater than 2 times.

Accepted Answer

A) True 
 B)False

Question 20

Taxpayers and special interest groups often have interest in the information generated by government accounting.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Which of the following is an example of a financial transaction?

In businesses that handle a lot of perishable items (such as supermarkets) the actual movement of goods through inventory most closely resembles the LIFO inventory valuation technique.

Company resources that are purchased with the intention that they will convert to cash within one year are

Accounting software has proven to be especially helpful for small-business owners.

Marshall Manufacturing has recorded its unpaid bill for supplies under a current liabilities account on the balance sheet. This payment will be due to the supplier in less than a year.

A bookkeeper's first task is to record the firm's transactions in a journal.

________ refers to how quickly an asset can be converted into cash.

A lower than average inventory turnover ratio indicates excellent inventory management practices.

An accountant who works for a single business or government agency is referred to as a

As a first step in the accounting cycle, ________ involves the recording of business transactions.

Many businesses now use computers and accounting software to simplify the mechanical aspects involved in accounting.

The ________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

A comparison of bookkeeping and accounting indicates that

A(n) ________ provides accounting services to individuals or firms on a fee basis.

A journal is where the initial record of a day's transactions is entered.

Earnings per share, return on sales, and return on equity are examples of

Which of the following would be classified as a general expense on an income statement?

The inventory turnover ratio for all firms should be greater than 2 times.

Taxpayers and special interest groups often have interest in the information generated by government accounting.

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