Deck 16: Understanding Accounting and Financial Information

Question 1

The accounting system happens once a year.

Answer 1

False

Question 2

Accounting has been called the language of business.

Answer 2

True

Question 3

It is almost impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.

Answer 3

True

Question 4

Purchasing insurance,paying employees,and using supplies are all examples of financial transactions.

Question 5

After recording a business' transactions,accountants usually classify the transactions into groups with common characteristics.

Question 6

The Canadian government is a user of accounting information.

Question 7

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better decisions.

Question 8

Accounting involves both the recording and the interpreting of financial events.

Question 9

Accounting supports the four functions of management and is designed to assist decision makers-both internal and external.

Question 10

Good decisions are based on good information.That's why an organization needs accounting-to provide good information.

Question 11

Jeremy operates his own small business,but doesn't want to be bothered with dealing with accounting information.He tells his friends,"All I need accounting for is to prepare my income tax return for my business.I'll hire someone to do that for me".Jeremy's attitude would be disastrous if he managed a large firm,but is a reasonable view for a small business owner.

Question 12

Although managers who work for large firms must know something about accounting,people who run small businesses only need to know the basics of bookkeeping.

Question 13

If you know how to keep your customers satisfied,you can successfully manage a business without knowing anything about accounting.

Question 14

Accountants do most of the work involved in recording financial events and transactions,but the actual classifying and interpreting of this data is left to financial managers.

Question 15

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

Question 16

Owners,creditors,suppliers,employees,and the government all are users of accounting information.

Question 17

A firm's financial statements represent a health report regarding the condition of the firm.

Question 18

The ability to read and understand financial statements is no longer an important skill for managers.

Question 19

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

Question 20

In an effort to maintain a competitive advantage,most firms do not share accounting information with people outside of the firm.

Question 21

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

Question 22

As the burden of taxes grows in the economy,the role of the auditor becomes increasingly important to the organization.

Question 23

Financial accounting is used to provide information and analysis that managers within the organization can use to assist them in decision making.

Question 24

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

Question 25

Financial accountants prepare reports for owners,creditors,suppliers,and others outside of the organization.

Question 26

Information contained in a firm's annual report largely represents work done by managerial accountants.

Question 27

Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

Question 28

The Revenue Canada is responsible for establishing accounting standards used by accountants working in government accounting.

Question 29

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

Question 30

The job of reviewing and evaluating the records used to prepare a company's financial statements is referred to as compliance.

Question 31

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

Question 32

A firm's annual report is a yearly statement of the financial condition,progress,and expectations of the organization during one year.

Question 33

In large companies,certified internal auditors are usually responsible for preparing tax returns and developing tax strategies for businesses.

Question 34

Accounting information is not relevant for nonprofit organizations.

Question 35

Churches,schools,and charitable organizations all hire accountants.

Question 36

Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

Question 37

The accounting profession is divided into two main fields: bookkeeping and auditing.

Question 38

Budget preparation is one aspect of managerial accounting.

Question 39

A tax accountant is responsible for preparing tax returns and developing tax strategies.

Question 40

There are five key working areas in accounting: financial accounting,managerial accounting,auditing,tax accounting,and governmental and not-for-profit accounting.

Question 41

Managerial accountants primarily work in industry,but have recently been given the right to work in public practice.

Question 42

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

Question 43

Bookkeeping is part of accounting,but accounting goes far beyond the activities involved in bookkeeping.

Question 44

At present,accounting software packages have proven to be too complex and expensive to be useful for owners of small businesses.

Question 45

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

Question 46

Accounting and bookkeeping are terms used for essentially the same activity in an organization.

Question 47

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

Question 48

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

Question 49

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information that Martha and her group will follow most closely will be provided by certified public accountants.

Question 50

The Sarbanes-Oxley Act applies to all U.S.companies.

Question 51

The accounting book that provides all the information about a single account in one place is called the ledger.

Question 52

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

Question 53

A major part of a bookkeeper's job is to interpret financial data and suggest strategies for improving the firm.

Question 54

Jamal is an accountant employed by Acctex,Inc.Jamal is an example of a public accountant.

Question 55

Deron 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,Lighting Freight Service,and has done so for the last seven years.Deron is a certified government accountant.

Question 56

In Canada,there are three different professional accounting designations.

Question 57

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

Question 58

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.

Question 59

The books where accounting data are first entered are called ledgers.

Question 60

The Sarbanes-Oxley Act clarifies the roles of both private and public accountants.

Question 61

To find out details of the maintenance costs,within the accounting system,you should refer to the ledger.

Question 62

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

Question 63

Posting is a step in the accounting cycle that involves transferring information from the journal into the appropriate accounts in a ledger.

Question 64

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Question 65

The purpose of a trial balance is to prepare a practice balance sheet.

Question 66

The first step in the accounting cycle is posting information regarding business transactions into the ledgers.

Question 67

One of the statements prepared in the accounting cycle is the statement of cash flows.

Question 68

Felicia is a public accountant.She has been asked to prepare the financial statements for McNick's Auto Body Shop.She is at the stage of the accounting cycle where she wants to summarize all of the data in the accounting ledgers to see whether the figures appear to be correct and balanced.Felicia will need to prepare a statement of cash flows in order to complete this stage of the cycle.

Question 69

Miko is the head of the accounting department at Microflush.She and her subordinates recently completed a trial balance.They are now likely to be working on the balance sheet,income statement and statement of cash flows.

Question 70

Computers today can actually record and analyze data,in addition to printing financial reports.

Question 71

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

Question 72

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

Question 73

Most businesses use computers to simplify the mechanical aspects involved in accounting.

Question 74

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

Question 75

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.

Question 76

Computer-based continuous auditing can be used to discover cash flow problems.

Question 77

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

Question 78

If a firm has $100,000 in assets and liabilities of $62,000,then the owner's equity is equal to $162,000.

Question 79

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

Question 80

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.