Question 1

Inputs to the accounting system include sales documents.

Accepted Answer

A) True 
 B)False

Question 2

________ measures the amount of profit earned by a company for each share of outstanding common stock.

Accepted Answer

A) Basic earnings per share (basic EPS) 
B) Diluted earnings per share (diluted EPS) 
C) Simple earnings per share (simple EPS) 
D) Return on shares outstanding (RSO) 
A) Basic earnings per share (basic EPS) 
B) Diluted earnings per share (diluted EPS) 
C) Simple earnings per share (simple EPS) 
D) Return on shares outstanding (RSO)

Question 3

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 4

Accountants not only provide financial information to the firm,they:

Accepted Answer

A) Replace the firm's need for managers. 
B) Also provide information regarding competitors. 
C) Assist in interpreting that information. 
D) Design the computer information systems. 
A) Replace the firm's need for managers. 
B) Also provide information regarding competitors. 
C) Assist in interpreting that information. 
D) Design the computer information systems.

Question 5

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 6

________ is the monetary value that is received for goods sold,services rendered and money received from other sources.

Accepted Answer

A) Revenue 
B) Gross margin 
C) Net income 
D) Cost of goods sold 
A) Revenue 
B) Gross margin 
C) Net income 
D) Cost of goods sold

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Accepted Answer

A) True 
 B)False

Question 9

Gross profit represents profit after the deduction of cost of goods sold,and before the deduction of all other selling expenses,general expenses,and tax expense.

Accepted Answer

A) True 
 B)False

Question 10

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

Accepted Answer

A) True 
 B)False

Question 11

The total cost of goods sold reported on an income statement is not affected by the inventory valuation method the firm uses.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Mike is the head of the accounting department at Micro flash.After completing the trial balance,he will proceed with the preparation of the balance sheet,the income statement and the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 14

Explain the meaning of the fundamental accounting equation and its relation to the Balance Sheet.If it is helpful,create an example using numbers.

Accepted Answer

The fundamental accounting equation is a

Question 15

Marshall McBride inherited $10,000 from his Great Aunt Martha.He invested $5,000 in a new start-up venture,10th Generation,Inc. ,and the other $5,000 in Major Chemicals,Inc,a well-known chemical company that's been around for years.Yesterday,he gathered the following information from the financial statements of these companies At this time,Marshall's return on equity is:

Accepted Answer

A) 16% on the 10th Generation,Inc.stock;11% on the Major Chemicals,Inc.stock 
B) 8.5% on the 10th Generation,Inc stock;10.5% on the Major Chemicals,Inc.stock 
C) 2.24% on the 10th Generation,Inc stock;2.8% on the Major Chemicals,Inc.stock 
D) 4.5% on the 10th Generation,Inc.stock;5.60% on the Major Chemicals,Inc.stock 
A) 16% on the 10th Generation,Inc.stock;11% on the Major Chemicals,Inc.stock 
B) 8.5% on the 10th Generation,Inc stock;10.5% on the Major Chemicals,Inc.stock 
C) 2.24% on the 10th Generation,Inc stock;2.8% on the Major Chemicals,Inc.stock 
D) 4.5% on the 10th Generation,Inc.stock;5.60% on the Major Chemicals,Inc.stock

Question 16

The balance sheet is composed of the following types of accounts:

Accepted Answer

A) Revenue,expenses,and earnings. 
B) Operating expenses,cash flow,and capital expenditures. 
C) Capital,cost,and valuation. 
D) Assets,liabilities,and owners' equity. 
A) Revenue,expenses,and earnings. 
B) Operating expenses,cash flow,and capital expenditures. 
C) Capital,cost,and valuation. 
D) Assets,liabilities,and owners' equity.

Question 17

Derek has 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.Derek is a certified government accountant.

Accepted Answer

A) True 
 B)False

Question 18

In calculating cost of goods sold,Meg Malloy noticed that her accounting software included the freight charges on purchased goods.Your response to this procedure is:

Accepted Answer

A) Freight charges are a legitimate part of cost of goods sold. 
B) Freight charges should be subtracted as part of general expenses. 
C) Freight charges cannot be deducted as an expense on the income statement. 
D) Freight charges are part of revenues. 
A) Freight charges are a legitimate part of cost of goods sold. 
B) Freight charges should be subtracted as part of general expenses. 
C) Freight charges cannot be deducted as an expense on the income statement. 
D) Freight charges are part of revenues.

Question 19

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.

Question 20

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Inputs to the accounting system include sales documents.

________ measures the amount of profit earned by a company for each share of outstanding common stock.

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.

Accountants not only provide financial information to the firm,they:

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

________ is the monetary value that is received for goods sold,services rendered and money received from other sources.

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

The balance sheet reflects the fact that assets equal the sum of liabilities and owners' equity.

Gross profit represents profit after the deduction of cost of goods sold,and before the deduction of all other selling expenses,general expenses,and tax expense.

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

The total cost of goods sold reported on an income statement is not affected by the inventory valuation method the firm uses.

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

Mike is the head of the accounting department at Micro flash.After completing the trial balance,he will proceed with the preparation of the balance sheet,the income statement and the statement of cash flows.

Explain the meaning of the fundamental accounting equation and its relation to the Balance Sheet.If it is helpful,create an example using numbers.

The balance sheet is composed of the following types of accounts:

Derek has 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.Derek is a certified government accountant.

In calculating cost of goods sold,Meg Malloy noticed that her accounting software included the freight charges on purchased goods.Your response to this procedure is:

A bookkeeper's first task is to:

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics 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

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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

Bonus A: Using Technology to Manage Information

Bonus B: Managing Risk

Bonus C: Managing Your Personal Finances

Appendix: Working Within the Legal Environment

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