Question 1

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 2

When companies owe money to creditors, suppliers, and others, these outstanding amounts are recorded on the balance sheet as ________.

Accepted Answer

A)  contra-assets 
B)  liabilities 
C)  owners' equity 
D)  expenses 
A)  contra-assets 
B)  liabilities 
C)  owners' equity 
D)  expenses

Question 3

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

Accepted Answer

A) True 
 B)False

Question 4

Terry is opening a small sports store in his town. At the advice of a friend who is a bookkeeper, he keeps the receipts of everything he purchases for the business in the bottom drawer of his desk, along with all other business expenses, such as his retail license, his rent expense, and insurance expense. You suggest that ________.

Accepted Answer

A)  Terry continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. 
B)  Terry invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. 
C)  Terry continue with this procedure because there is very little difference between one expense and another. 
D)  Terry stop wasting valuable time saving the receipts because accountants only record sales transactions. 
A)  Terry continue with this procedure, but only until the store opens, at which time he will need an additional drawer for his sales transactions. 
B)  Terry invest some time in exploring an accounting system that will make it easier to classify and summarize accounting information. 
C)  Terry continue with this procedure because there is very little difference between one expense and another. 
D)  Terry stop wasting valuable time saving the receipts because accountants only record sales transactions.

Question 5

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

Accepted Answer

A) True 
 B)False

Question 6

Accounting is NOT important for nonprofit organizations since financial data is not critical to their success.

Accepted Answer

A) True 
 B)False

Question 7

Computerized accounting programs have eliminated the need to prepare a trial balance.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The equipment a firm owns and the money it has in its bank account are considered assets.

Accepted Answer

A) True 
 B)False

Question 10

Accounting provides information about the financial condition and operating performance of a firm.

Accepted Answer

A) True 
 B)False

Question 11

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

Accepted Answer

A) True 
 B)False

Question 12

An analysis of the statement of cash flows can help a firm prevent cash shortages.

Accepted Answer

A) True 
 B)False

Question 13

What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

Accepted Answer

The income statement will show:
· net re

Question 14

Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Accepted Answer

A) True 
 B)False

Question 15

Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob?

Accepted Answer

A)  return on sales 
B)  return on equity 
C)  inventory turnover 
D)  acid test ratio 
A)  return on sales 
B)  return on equity 
C)  inventory turnover 
D)  acid test ratio

Question 16

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 17

A firm's ________ reports the profit or loss for the firm over a specified time period.

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  bank statement 
A)  income statement 
B)  balance sheet 
C)  statement of cash flows 
D)  bank statement

Question 18

The top managers of Pages and Pages Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong

Accepted Answer

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

Question 19

Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves

Accepted Answer

A)  posting the results of these statements to the appropriate journal. 
B)  analyzing the firm's financial statements to evaluate the financial condition of the firm. 
C)  conducting forensic tests of the data to ensure its accuracy. 
D)  placing the data used to construct the statements into an archive known as a data warehouse. 
A)  posting the results of these statements to the appropriate journal. 
B)  analyzing the firm's financial statements to evaluate the financial condition of the firm. 
C)  conducting forensic tests of the data to ensure its accuracy. 
D)  placing the data used to construct the statements into an archive known as a data warehouse.

Question 20

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.

Exam 17: Understanding Accounting and Financial Information

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

When companies owe money to creditors, suppliers, and others, these outstanding amounts are recorded on the balance sheet as ________.

One advantage of the double-entry method of bookkeeping is that it helps to identify mistakes made in recording financial transactions.

There are two major financial statements prepared at the completion of the accounting cycle: the journal and the ledger.

Accounting is NOT important for nonprofit organizations since financial data is not critical to their success.

Computerized accounting programs have eliminated the need to prepare a trial balance.

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

The equipment a firm owns and the money it has in its bank account are considered assets.

Accounting provides information about the financial condition and operating performance of a firm.

A series of high-profile scandals in the early 2000s put the accounting profession under intense scrutiny.

An analysis of the statement of cash flows can help a firm prevent cash shortages.

What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

Because each business is unique, the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob?

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

A firm's ________ reports the profit or loss for the firm over a specified time period.

The top managers of Pages and Pages Bookstores want to indicate to the firm's shareholders how effectively they have managed the company. Perhaps the most meaningful way to do this would be by reporting strong

Brody has just finished working on the balance sheet, income statement, and statement of cash flows for his company. The next step in the accounting cycle involves

A bookkeeper's first task is to

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

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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