Question 1

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 2

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 3

An accountant who has a bachelor's degree, two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

Accepted Answer

A) True 
 B)False

Question 4

Allison Robards is the owner of Backstreet Books, a small eclectic-style bookstore in a bustling college town. Allison prides herself in selecting hard to find books and magazines that her clientele enjoy. Recently, Allison is experiencing a cash flow shortage, and she is concerned that she may be purchasing too many copies of each title. Having recently completed a business class, you suggest to Allison that she calculate the ______________ ratio for her store, and then compare it to other stores in her industry.

Accepted Answer

A)  current 
B)  debt to equity 
C)  return on equity 
D)  inventory turnover 
A)  current 
B)  debt to equity 
C)  return on equity 
D)  inventory turnover

Question 5

The key financial statements are the balance sheet, the income statement, and the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

The accounting book or computer program where each day's transactions are first recorded is called a:

Accepted Answer

A)  posting workbook. 
B)  general ledger. 
C)  balance sheet. 
D)  journal. 
A)  posting workbook. 
B)  general ledger. 
C)  balance sheet. 
D)  journal.

Question 7

The Barkley Company's balance sheet shows: what the business owns, minus what the business owes, which equals the book value (or net worth) of the business.

Accepted Answer

A) True 
 B)False

Question 8

As an accountant, Joe's responsibilities include:

Accepted Answer

A)  developing plans to help his company establish a supply chain. 
B)  setting prices for specific goods and services. 
C)  summarizing and interpreting financial information needed by his firm's managers. 
D)  developing a fringe benefit program that improves employee morale. 
A)  developing plans to help his company establish a supply chain. 
B)  setting prices for specific goods and services. 
C)  summarizing and interpreting financial information needed by his firm's managers. 
D)  developing a fringe benefit program that improves employee morale.

Question 9

Activities of managerial accountants include measuring and reporting the costs of production, marketing and other functions within the organization.

Accepted Answer

A) True 
 B)False

Question 10

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Julio borrowed money from a close friend to obtain a liquor license for his pub, and gave him a written promise to repay the amount within six months. Julio should list this business debt as an operating expense on his pub's balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

Double-entry bookkeeping requires that every transaction be recorded in two places.

Accepted Answer

A) True 
 B)False

Question 14

We would expect the inventory turnover ratio for a ski shop to be _______ than the turnover for a convenience store.

Accepted Answer

A)  higher 
B)  more meaningful 
C)  lower 
D)  less helpful 
A)  higher 
B)  more meaningful 
C)  lower 
D)  less helpful

Question 15

Carol has worked as a bookkeeper for a small clothing store for almost three years. Her old boss recently retired and a new manager took over. The new manager frequently asks her for information and advice about how to interpret the information she records. Carol's experience as a bookkeeper means she is qualified to provide this type of advice.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

Accepted Answer

A) True 
 B)False

Question 18

The LIFO method of inventory valuation bases the cost of goods sold on the cost of:

Accepted Answer

A)  merchandise that has been held in inventory for the longest period of time. 
B)  most recent merchandise purchased by the firm. 
C)  actual units customers purchased. 
D)  merchandise the firm acquired at the lowest cost. 
A)  merchandise that has been held in inventory for the longest period of time. 
B)  most recent merchandise purchased by the firm. 
C)  actual units customers purchased. 
D)  merchandise the firm acquired at the lowest cost.

Question 19

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

Accepted Answer

A) True 
 B)False

Question 20

Financial accounting involves activities such as preparing budgets and measuring production costs.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

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

GAAP refers to a set of standards concerning accounting principles that were established by the Financial Accounting Standards Board.

An accountant who has a bachelor's degree, two years of experience in internal auditing and who has passed an exam by the Institute of Internal Auditors can become recognized as a certified internal auditor.

The key financial statements are the balance sheet, the income statement, and the statement of cash flows.

The accounting book or computer program where each day's transactions are first recorded is called a:

The Barkley Company's balance sheet shows: what the business owns, minus what the business owes, which equals the book value (or net worth) of the business.

As an accountant, Joe's responsibilities include:

Activities of managerial accountants include measuring and reporting the costs of production, marketing and other functions within the organization.

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

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

Julio borrowed money from a close friend to obtain a liquor license for his pub, and gave him a written promise to repay the amount within six months. Julio should list this business debt as an operating expense on his pub's balance sheet.

Double-entry bookkeeping requires that every transaction be recorded in two places.

We would expect the inventory turnover ratio for a ski shop to be _______ than the turnover for a convenience store.

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

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

The LIFO method of inventory valuation bases the cost of goods sold on the cost of:

A firm's basic earnings per share measures how much profit was earned for each dollar invested by the firm's owners.

Financial accounting involves activities such as preparing budgets and measuring production costs.

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 Union and 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

Managing the Marketing Mix: Product, Price, Place and Promotion

Extension: Working Within the Legal Environment

Extension: Using Technology to Manage Information

Extension: Managing Risk

Extension: Managing Personal Finances

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