Question 1

Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization.

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

Johnson Products is a small manufacturing firm specializing in custom-order tool and die work. A computerized accounting system would help Johnson Products by:

Accepted Answer

A)  making key accounting and financial decisions. 
B)  helping management identify cash flow and other financial difficulties more quickly. 
C)  eliminating the need to prepare financial statements and other reports. 
D)  eliminating the need to perform the three middle steps of the accounting cycle. 
A)  making key accounting and financial decisions. 
B)  helping management identify cash flow and other financial difficulties more quickly. 
C)  eliminating the need to prepare financial statements and other reports. 
D)  eliminating the need to perform the three middle steps of the accounting cycle.

Question 4

A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time.

Accepted Answer

A) True 
 B)False

Question 5

As a certified public accountant, you would be working in the area of managerial accounting.

Accepted Answer

A) True 
 B)False

Question 6

Accounting information is not relevant for nonprofit organizations.

Accepted Answer

A) True 
 B)False

Question 7

Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

Accepted Answer

A) True 
 B)False

Question 8

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Citywide Insurance Corporation's internal accountants can prepare an audit for the company.

Accepted Answer

A) True 
 B)False

Question 11

Juliet has found that her small business needs a better way to maintain accounting records and analyze business opportunities. Currently, she uses a manual accounting system. These days, any off-the-shelf accounting package available should do an excellent job of meeting her firm's accounting needs.

Accepted Answer

A) True 
 B)False

Question 12

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following:   If 25% of their net income is paid to the government in taxes, what is their net income after taxes?

Accepted Answer

A)  $1410.00 
B)  $1160.00 
C)  $682.00 
D)  $870.00 
A)  $1410.00 
B)  $1160.00 
C)  $682.00 
D)  $870.00

Question 13

One important source of financing for most small businesses is the owner's savings. If the owner contributes money to the business from his/her personal savings, it will be recorded in the owners' equity account on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 14

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years. Scott would record this as a __________ on its balance sheet.

Accepted Answer

A)  declining balance asset 
B)  retained earning 
C)  long-term liability 
D)  long-term expense 
A)  declining balance asset 
B)  retained earning 
C)  long-term liability 
D)  long-term expense

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Thoroughly describe each of six parts of the accounting cycle.

Accepted Answer

Part 1 requires the bookkeeper or accoun

Question 17

Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:

Accepted Answer

A)  produce an internal audit. 
B)  take overall stock of its accounting functions. 
C)  provide a "generally accepted practices" endorsement. 
D)  perform an independent audit. 
A)  produce an internal audit. 
B)  take overall stock of its accounting functions. 
C)  provide a "generally accepted practices" endorsement. 
D)  perform an independent audit.

Question 18

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 19

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

Accepted Answer

A) True 
 B)False

Question 20

Liquidity ratios are of particular importance to stockholders, but have little relevance for creditors.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization.

Debts owed by a business are called ___________.

Johnson Products is a small manufacturing firm specializing in custom-order tool and die work. A computerized accounting system would help Johnson Products by:

A statement of cash flows summarizes a company's cash receipts and cash payments over a period of time.

As a certified public accountant, you would be working in the area of managerial accounting.

Accounting information is not relevant for nonprofit organizations.

Double-entry bookkeeping can help identify a recording error made by a bookkeeper.

Accounting software for small businesses has become so sophisticated that most small business owners will never need to consult with an actual accountant or understand accounting information themselves.

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

Citywide Insurance Corporation's internal accountants can prepare an audit for the company.

Carole Grand and Bonnie Lamore run a shuttle service from Western Illinois to the busy Chicago O'Hare airport. Last month, they recorded the following: If 25% of their net income is paid to the government in taxes, what is their net income after taxes?

One important source of financing for most small businesses is the owner's savings. If the owner contributes money to the business from his/her personal savings, it will be recorded in the owners' equity account on the balance sheet.

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years. Scott would record this as a __________ on its balance sheet.

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

Thoroughly describe each of six parts of the accounting cycle.

Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:

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

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

Liquidity ratios are of particular importance to stockholders, but have little relevance for creditors.

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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