Deck 7: Accounting: Decision Making by the Numbers

Question 1

Accounting systems are utilized by companies for several reasons,but they have little value when it comes to making economic decisions.

Answer 1

False

Question 2

Recording financial transactions is an accounting function.

Answer 2

True

Question 3

The use of computerized accounting systems has greatly reduced the need for private accountants in medium and large-sized firms.

Answer 3

False

Question 4

Public accountants provide a variety of accounting services for clients on a fee basis.

Question 5

Forensic accountants provide standardized reports primarily intended for managers and other decision-makers employed by an organization.

Question 6

The vast majority of firms today use computerized accounting systems and sophisticated software to record and summarize transactions.

Question 7

Mary Reardon is an employee and shareholder for the McNeely Company.Mary is considered a primary user of her firm's accounting information.

Question 8

Private,internal,and government accountants are business titles used by certified public accountants.

Question 9

Forensic accountants combine their knowledge of accounting with investigative skills.

Question 10

Accountant and bookkeeper are just two terms that refer to the same profession.

Question 11

The accounting profession is seldom concerned with the interpretation of financial information.

Question 12

The managers of a company are the only stakeholders of a company that have a legitimate interest in its accounting information.

Question 13

Private and public accountants do the same type of work but have different qualifications.

Question 14

Key users of a corporation's accounting information include managers,government agencies,and shareholders.

Question 15

Private accountants work for private citizens who are not part of a firm,while public accountants work internally for publicly traded companies.

Question 16

Through additional preparation,accountants may become a certified management accountant (CMA),chartered accountant (CA),and/or certified internal auditor.These certifications signify advanced preparation in their field.

Question 17

Accounting is a system for recognizing,recording,organizing,analyzing,summarizing,and reporting information about the financial transactions that affect an organization.

Question 18

Internal auditors are also known as chartered accountants.

Question 19

Internal auditors are private accountants responsible for verifying their company's internal accounting procedures.

Question 20

Private accountants work within a business organization,preparing reports and analyzing financial information for the company that employs them.

Question 21

As a result of the accounting scandals of the late 1990s and early 21st century,many countries have imposed new ethics-related requirements on accountants.

Question 22

An income statement is the financial statement that reports revenues,expenses,and net income resulting from a firm's operations over an accounting period.

Question 23

Generally accepted accounting principles (GAAP)are a set of accounting standards used in the preparation of financial statements.

Question 24

GAAP is the policy board that establishes the rules known as the FASB of accounting.

Question 25

Assets are the tangible and intangible resources of value owned by a firm.

Question 26

A statement of cash flows is the financial statement identifying a firm's sources and uses of cash in a given accounting period.

Question 27

One criticism of GAAP is that it is too rigid and fails to take into account the fact that one size doesn't fit all in accounting.

Question 28

Financial accounting is the branch of accounting that prepares financial statements for use by owners,creditors,suppliers,and other stakeholders.

Question 29

Net income is the difference between the revenue a firm earns and the expenses it incurs in a given time period.

Question 30

Revenue,expenses,and net income are the key sections found on a statement of cash flows.

Question 31

According to the accounting equation,Assets - Expenses = Net Income.

Question 32

Liabilities are resources owned by a firm.

Question 33

The owners' equity section of the balance sheet indicates the claims a firm's owners have against their company's assets.

Question 34

The accounting equation is based on the fact that the value of a firm's assets is,by definition,exactly equal to the financing provided by creditors and by owners for the purchase of those assets.

Question 35

The statement of cash flows shows the cash flowing in and out of the firm from three types of activities: operations,investing,and financing.It also shows the net increase or decrease in cash from all three sources and the total amount of cash on hand at the end of the period.

Question 36

Assets = Liabilities + Net income.

Question 37

The purpose of GAAP is to specify the procedures used in managerial accounting to prepare budgets and cost reports.

Question 38

Two of the goals underlying GAAP are to ensure that the statements prepared in financial accounting are relevant and consistent.

Question 39

Since it deals strictly with numbers,the practice of accounting is free from ethical considerations.

Question 40

Recently,some critics of current practices have suggested that GAAP's flexibility allows managers to manipulate financial statements in ways that make their firms' financial performance appear to be better than it really was.

Question 41

When auditors discover more serious and widespread problems with a firm's statements they will offer an adverse opinion.

Question 42

Ralph owns some stock in the Lottadoe Corporation,and wants to know whether this company earned a profit over the most recent year.This information would be available on the company's balance sheet.

Question 43

Revenues are increases in a firm's assets resulting from the sale of goods,the provision of services,or other activities intended to earn income.

Question 44

The accounting entity approach is an accounting method that recognizes revenue when it is earned and matches expenses to the revenues produced.

Question 45

Business expenses are available resources that stakeholders control.

Question 46

A college student registers for classes and pays the tuition with a credit card.Because it uses accrual-basis accounting,the college will recognize the payment as revenue as soon as the transaction turns into cash in the school's bank account.

Question 47

The cash balance reported at the bottom of the statement of cash flows should equal the amount of cash reported for a balance sheet prepared at the end of the same accounting period.

Question 48

The cash flows received from operations reported in the statement of cash flows should be exactly equal to the revenue the firm reports on its income statement.

Question 49

If an auditor identifies limited problems with the firm's financial methods and statements,but believes that in all other aspects the statements are fair and accurate,the auditor's report will express an adverse opinion.

Question 50

Rosalyn owns stock in Munnymacher Inc.and just received her annual report from this company.If she wants to see the total value of Munnymacher's assets,she should look at the company's balance sheet.

Question 51

Expenses are listed on the left side of a balance sheet.

Question 52

A balance sheet is a financial statement reporting the financial position of a firm at a particular point in time by identifying and reporting the value of the firm's assets,liabilities,and owners' equity.

Question 53

Accrual-basis accounting is the method that recognizes revenue when it is earned and matches expenses to those revenues.

Question 54

Horizontal analysis is an analysis of financial statements comparing account values reported over a period of years.This information is used to serve as a basis of comparison and to identify trends.

Question 55

Liabilities could include bank loans and current payments owed to suppliers.

Question 56

A company's balance sheet will "balance" even if it is on the verge of bankruptcy.

Question 57

An unqualified opinion should set off alarm bells to view the firm's financial statements with extreme skepticism.

Question 58

When an external audit doesn't uncover any problems with the firm's financial methods and statements,the auditor will issue an unqualified opinion.

Question 59

Balance sheets only reflect the assets and liabilities of the cost of goods sold.

Question 60

The statement of retained earnings shows how retained earnings have changed from one accounting period to the next.By subtracting dividends paid to shareholders from net income,managers will see changes in this statement over time.

Question 61

The master budget is a combined statement of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period.

Question 62

Which of the following is a system for recognizing,recording,organizing,summarizing,analyzing,and reporting information about the financial transactions that affect an organization?

A)accounting
B)bookkeeping
C)auditing
D)managerial finance

Question 63

Publicly traded firms with complex changes in their operations may report these changes in the notes section of their annual report.

Question 64

What does accounting provide to users?

A)auditing references to assist Canada Revenue Agency in collecting tax payments
B)timely and relevant information needed to make sound economic decisions
C)information on the financial decisions of its shareholders
D)knowledge of how to position a product for its market

Question 65

Triple bottom line is a broader set of performance measures focusing on people,planet,and profits.

Question 66

What process encompasses the routine procedures involved in recording financial transactions?

A)accounting
B)costing
C)bookkeeping
D)auditing

Question 67

Many of today's leading accountants are using TBL performance measures,TBL stands for True Bottom Line.

Question 68

For what purpose would employees be most likely to use their employer's accounting information?

A)developing their personal financial plan
B)calculating their hourly wage rate
C)evaluating the financial performance of the company and making the case for pay raises or bonuses
D)assessing dynamic marketplace conditions for employment opportunities

Question 69

Budgeting is a management tool that explicitly shows how a firm will acquire and use resources needed to achieve its goals over a specific time period.

Question 70

Lakitha has been asked to evaluate the desirability of outsourcing some functions her company currently performs internally.In order to carry out her analysis,she plans to compare the costs and revenues resulting from outsourcing to the firm's current costs and revenues.Lakitha's approach is an example of incremental analysis.

Question 71

Which of the following describes what managers,shareholders,employees,and creditors are?

A)people designated by the board of directors to review company documents
B)all users of accounting information to assess a company's finances
C)auditors of the health and well-being of a company
D)all employees of a corporation

Question 72

For what purpose would shareholders be most likely to use accounting information provided by their firm?

A)gauging whether the firm is generating a satisfactory return on their investment
B)determining whether the firm can repay them for their stock
C)making capital budgeting decisions
D)obtaining information needed to fill out their individual tax returns

Question 73

Operating budget documents include the cash budget and the capital budget.

Question 74

Incremental analysis is the evaluation and comparison of the financial impact different alternatives would have in a particular decision-making situation.

Question 75

Managerial accounting is the branch of accounting that provides reports and analysis to managers to help those managers make informed business decisions.

Question 76

Managerial accounting involves developing standardized reports according to a predetermined schedule.

Question 77

Financial budgets are the budget documents that identify cash and other financial resources the firm will acquire and use to finance operations and make planned investments in fixed assets.

Question 78

Horizontal analysis compares the balance sheet in a given year to the income statement and statement of cash flows in that same year to ensure that these three statements contain consistent information.

Question 79

Activity-based costing is a technique used by managerial accountants to assign product costs based on links between activities that drive costs and the production of specific products.

Question 80

Tiny Timber Tree Farms applied to United Bank for a business loan.Which financial statements would the loan officer of the bank be most likely to request?

A)journals, ledgers, and trial balances
B)the prospectus, statement of retained earnings, and total liability statement
C)total debits and total credits
D)balance sheets, income statements, and cash flow statements