Deck 17: Using Management and Accounting Information

Question 1

What are the differences between managerial accounting and financial accounting? From a career standpoint, which type do you prefer and why?

Answer 1

Answer not provided.

Question 2

Describe the first step, collecting data, of developing a management information system. Define internal and external data sources with several examples of each.

Answer 2

Answer not provided.

Question 3

Define a balance sheet (also called a statement of financial position). What does it balance?

Answer 3

Answer not provided.

Question 4

Explain why a firm's financial statements should be audited.

Question 5

Write the accounting equation. Then define each term and give an example.

Question 6

Today corporations are required to send their stockholders an annual report. Assume that you are a prospective investor trying to decide if you should invest in a specific corporation. What type of information is contained in an annual report that would help you decide if this is the right investment for you?

Question 7

What types of accounts might be listed on a firm's income statement? What would be the term for the dollar amount left at the bottom of the income statement?

Question 8

Would you expect the information needs of top managers to differ from those of middle- and lower-level managers? Explain your answer.

Question 9

What type of information is reported on a corporation's statement of cash flows?

Question 10

Managers and other groups interested in a firm's financial records must be able to "trust the numbers." Unfortunately, a large number of accounting scandals have caused people to doubt the numbers. Why do you think corporate executives "cook" their company's books?

Question 11

Describe each of the five functions of a management information system.

Question 12

Describe the employment trends for accountants, auditors, and managers in the accounting profession between now and the year 2020. Then describe what skills employees must have in order to be successful in the accounting profession.

Question 13

In your own words, describe the relationship between information and risk and how this relationship could impact the business decision-making process.

Question 14

Compare information and data. Why might a manager prefer information to data?

Question 15

Briefly describe each of the four parts of a typical business report.

Question 16

Describe the three activities of a statement of cash flows. Where does each section fall on the statement and what does it account for?

Question 17

How might the information needs of a marketing manager differ from those of an operations manager?

Question 18

Why are current assets listed before fixed assets on the balance sheet?

Question 19

In what ways does the Sarbanes-Oxley Act improve the validity of the information provided by a firm's accounting system?

Question 20

How would it be easier to determine if a firm made or lost money last year―by looking at the balance sheet or by looking at the income statement? Support your answer by explaining in general terms what accounts a balance sheet lists and what accounts an income statement lists.

Question 21

On its company computer system, Gymboree has numerical and verbal descriptions about its suppliers and their prices, which as a whole is called ____. Managers can access and use this to make decisions about suppliers.

A) information
B) a database
C) an MIS
D) a DSS
E) data

Question 22

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. Which of the following represents a key component of the Sarbanes-Oxley Act relating to consulting services?

A) A public corporation must change its lead consulting firm every five years.
B) Accounting firms are prohibited from providing many types of consulting services to the companies they audit.
C) Accounting firms that report violations of the Sarbanes-Oxley Act must be banned from consulting for five years.
D) The SEC is required to establish a full-time five-member federal oversight board that will police the consulting industry.
E) Consultants must maintain financial documents and audit work papers for fifteen years.

Question 23

What is inventory turnover? How is it calculated? Why is it important for a manager to track this ratio?

Question 24

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job. To help the owners understand how effectively the firm is transforming sales into profits, Christine should address which of the following ratios?

A) Return on sales
B) Earnings per share
C) Acid-test ratio
D) Return of owners' equity
E) Inventory turnover

Question 25

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. What does GAAP stand for?

A) Generally accepted accounting principles
B) Generally accepted auditing principles
C) Generalized accounting and auditing principles
D) Generic accounting alternative practices
E) General administrative accounting practices

Question 26

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. If you applied for a job at RCR and were asked to state the accounting equation, which of these would you state?

A) Assets = liabilities ― owners' equity
B) Assets + liabilities = owners' equity
C) Assets ― liabilities = owners' equity
D) Assets = liabilities + owners' equity
E) Assets = liabilities ― owners' equity

Question 27

In theory, if Linda has complete and accurate information about a business decision she has to make, there is

A) very little risk.
B) no risk at all.
C) very high risk.
D) moderate risk.
E) more risk than if information is not known.

Question 28

Mary Nettles works for a marketing and advertising firm. She must choose one ad piece from a number of potential ad pieces. To ensure that she makes the right decision, she should

A) put a brief description of each ad piece in a hat and draw one.
B) ignore any feedback that she gets from coworkers and consumers and make the decision herself.
C) gather information from coworkers and consumers on their reaction to the different ad pieces.
D) let her supervisor choose the ad piece.
E) discard all ad pieces and develop a new advertising campaign.

Question 29

Why would managers, lenders, and investors compare current financial statements with those prepared for past accounting periods?

Question 30

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. One of RCR's clients is ABC Electronics. RCR develops ABC Electronics' statements and reports for ABC's stockholders, financial analysts, and bankers. These services can be classified as which of the following?

A) Non-accounting services
B) Tax accounting
C) Financial accounting
D) Managerial accounting
E) Cost accounting

Question 31

Information rules

A) emerge when research confirms the same results each time a problem is studied.
B) are of no use to most managers because situations are constantly changing.
C) are often called the great confusers.
D) cost too much to implement.
E) are valid only when they can be used to aid the decision-making process over a large number of years.

Question 32

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job. If the owners did not recognize the term "statement of financial position," Christine could use which of the following more common terms?

A) Income statement
B) Balance sheet
C) Statement of cash flows
D) Statement of retained earnings
E) Statement of financial ratios

Question 33

The basic resource from which plans are developed and decisions are made is called

A) information.
B) data.
C) tabulations.
D) objectives.
E) statistics.

Question 34

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job. When Christine talked about the accounting equation and the resources owned by the business--the cash, inventory, and equipment--she wants to make clear that she's referring to the ____ of the firm.

A) assets
B) owners' equity
C) liabilities
D) retained earnings
E) intangible assets

Question 35

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job. When Christine explained the asset side of a balance sheet, she included which of the following?

A) Retained earnings
B) Notes payable
C) Merchandise inventory
D) Long-term liabilities
E) Stockholders' equity

Question 36

What ratio is used to measure a firm's ability to pay its debts? How is it calculated and what does the calculation tell a manager? How can a low ratio be changed?

Question 37

Which of the following statements is true?

A) The more information a manager has, the more risk there is when making a decision.
B) The more information a manager has, the less risk there is when making a decision.
C) Risk improves decision making.
D) Most managers make decisions without any information.
E) When the amount of information is low, there is less risk.

Question 38

Ridgley, Cooper, and Ross (RCR)
Katie is the CEO of Ridgley, Cooper, and Ross (RCR), a regional accounting firm. RCR offers services in most areas of accounting, including auditing and consulting services. The firm must follow the GAAP rules, just like any other accounting firm. If there are information gaps that are not addressed and resolved by the firm, RCR could be considered a violator of the Sarbanes-Oxley Act. Katie understands what must be done and wants every employee of the firm to understand that they have to follow all the rules and regulations. Like any other industry, accounting is a competitive industry and employees of accounting firms must be productive, progressive, and well trained.
Refer to Ridgley, Cooper, and Ross. In order to be successful in the accounting industry, RCR employees must

A) know all areas of accounting and marketing.
B) have complete human resources training.
C) be able to communicate in multiple languages.
D) know how to do accounting the old fashioned way―using the manual, double-entry system.
E) have a strong background in financial management.

Question 39

Christine's First Job
Christine has just earned her undergraduate degree in accounting and has successfully completed the CPA exam. She recently interviewed with a relatively small and new company and was offered a job. The offer sounded very promising; the job had opportunities to grow with the company and provided diverse challenges. Christine accepted the job.
Once Christine started working, she realized that the owners and employees did not have a general understanding of accounting. She had to teach them how data is transformed into financial information and, from that point, reported on various statements. When she talked about the statement of financial position, they had no idea what she was talking about. She was the qualified individual responsible for accounting. No one else working with her had much knowledge. They did not even know the different financial ratios that someone could use to understand the financial standing of a company. Christine knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Christine's First Job. If the owners were interested in obtaining the company's current ratio, Christine should do which of the following?

A) Divide current assets by current liabilities
B) Multiply current assets by current liabilities
C) Divide net income after taxes by net sales
D) Get the difference between current assets and current liabilities
E) Subtract inventory from current assets

Question 40

Numerical or verbal descriptions that usually result from measurements of some sort are known as

A) information.
B) statistics.
C) software.
D) assets.
E) data.

Question 41

The transformation of data into a form useful for a specific purpose is called

A) MIS.
B) data processing.
C) transactions.
D) information processing.
E) implementation.

Question 42

Most data gathered for an MIS come from

A) customers.
B) bankers.
C) external sources.
D) internal sources.
E) information obtained from data firms.

Question 43

The following quotation would most likely be found in the ____ of a business report: "This report evaluates the significant decrease in sales experienced in the previous quarter and incorporates the results of surveys and interviews with customers, management, and economists."

A) body
B) conclusion
C) analysis
D) recommendations
E) introduction

Question 44

____ is a firm's procedures for generating, using, and sharing the data and information contained in the firm's database.

A) MIS
B) KM
C) IT
D) CPA
E) GAAP

Question 45

Operations managers need management information in all of the following areas except

A) the cost of production.
B) current inventory levels.
C) availability of resources.
D) future capitalization needs.
E) present and future sales levels.

Question 46

From an executive's viewpoint, which of the following statements does not describe an executive's motivation to "cook" a firm's books?

A) The desire to look good in the local newspapers or financial publications
B) The desire to impress Wall Street analysts
C) The desire to impress the firm's investors
D) The desire to be ethical
E) The desire to inflate the company's stock value

Question 47

Which type of manager would be most concerned with information about the products offered by competitors?

A) Financial
B) Marketing
C) Operations
D) Administrative
E) Human resources

Question 48

The purpose of ____ is to distribute timely and useful information from both internal and external sources to the decision makers who need it.

A) a manager awareness program
B) a management information system
C) entrepreneurial information software
D) a computer information program
E) a desktop information system

Question 49

An audit is

A) performed by the firm's private bookkeepers.
B) not necessary if the firm used generally accepted bookkeeping procedures.
C) required by many bankers and lenders who are trying to validate a firm's accounting statements.
D) a waste of the firm's resources.
E) a guarantee that a firm hasn't "cooked" the books.

Question 50

A measure that summarizes a particular characteristic of a group of numbers is called a(n)

A) array.
B) statistic.
C) asset.
D) data point.
E) liability.

Question 51

Which of the following is not one of the sections included in a typical business report?

A) Recommendations
B) Body
C) Introduction
D) Analysis
E) Conclusions

Question 52

The process of systematically collecting, analyzing, and reporting financial information is called

A) accounting.
B) bookkeeping.
C) auditing.
D) journalizing.
E) revenues.

Question 53

When Nathan applied for a loan to expand his sailboat business, the bank required that his financial statements be carefully examined by a CPA. The bank is requiring Nathan to have his financial statements

A) verified.
B) audited.
C) affirmed.
D) certified.
E) insured.

Question 54

The purpose of an audit is to ensure that financial statements have been prepared according to

A) the particular company's standards.
B) the industry's standards.
C) generally accepted accounting principles.
D) international accounting standards.
E) the standards of certified public accountants.

Question 55

Human resources managers need management information in all of the following areas except

A) wage levels and benefits packages.
B) financial ratios.
C) employment practices legislation.
D) union activities.
E) the firm's growth plans.

Question 56

All of the following would be examples of internal information sources except company

A) records.
B) managers.
C) competitors.
D) reports.
E) meetings.

Question 57

The specific types of information that managers need depend on their area of management and on their

A) level within the firm.
B) understanding of data.
C) background in computer science.
D) use of the information.
E) accounting background.

Question 58

Information rules do all of the following except

A) shorten the time spent analyzing choices.
B) correctly guide marketing decision makers.
C) help both managers and consumers make decisions.
D) remain valid forever once they are established.
E) emerge when research confirms the same results in repeated trials.

Question 59

A manager at the executive level responsible for ensuring that a firm has the equipment necessary to provide the information the firm's employees and managers need to make effective decisions is often called a(n)

A) information expert.
B) technology expert.
C) MIS officer.
D) informaiton technology officer.
E) database manager.

Question 60

Randy is shopping for an all-in-one printer/copier/scanner/fax machine. He decides to purchase a certain model because it has the highest price, so Randy assumes it must have the highest quality. Randy has applied a(n) ____ in making his decision.

A) data structure
B) reference price
C) database
D) information rule
E) qualitative analysis

Question 61

Regina owns and operates her own bakery and coffee shop. Regina has no accounting training and has only three employees. How does she most likely handle the necessary accounting for her business?

A) She does it herself because it takes little training or knowledge.
B) She hires a private accountant to work for her and take care of the accounting functions.
C) She has one of her part-time chefs do the accounting when he has time.
D) She pays a public accountant to do the accounting for her business.
E) She does nothing at all, because accounting is not necessary for businesses.

Question 62

According to the accountant for Michael's Floral Supply, the firm's assets are $124,000 and its liabilities are $31,000. Which of the following statements is true?

A) The owners' equity is $155,000.
B) The owners' equity is $93,000.
C) The firm's current assets are $62,000.
D) The firm's current liabilities are $24,000.
E) The firm's accounting equation won't balance.

Question 63

Which of the following is true about CPAs?

A) Almost everyone who does accounting work is a CPA.
B) CPA standards are the same in every state.
C) CPAs must participate in continuing education programs.
D) Once an individual has become a CPA, no further work is necessary to retain the certification.
E) The portions of the CPA examination are costing, taxing, budgeting, and billing.

Question 64

If the assets of Martin's Pet Store are $107,000 and the owners' equity is $75,000, which of the following is a true statement?

A) The owners' investment equals $182,000.
B) The current assets are worth $32,000.
C) The new income for the period is $32,000.
D) The long-term liabilities are $75,000.
E) The liabilities are $32,000.

Question 65

An airplane that FedEx owns and uses to deliver packages is a(n) ____ of FedEx.

A) liability
B) asset
C) owners' equity
D) expense
E) revenue

Question 66

If total liabilities were subtracted from total assets, the residual value would be

A) revenues.
B) owners' equity.
C) net income.
D) working capital.
E) expenses.

Question 67

Resources that a firm owns are called

A) revenue.
B) liabilities.
C) owners' equity.
D) assets.
E) expenses.

Question 68

After the Sarbanes-Oxley Act was signed by the president, auditors and accountants can be imprisoned for up to ____ years for destroying financial documents and willful violations of the securities laws.

A) fifty
B) thirty
C) twenty
D) ten
E) five

Question 69

Ernst & Young, KPMG, and PricewaterhouseCoopers are all

A) private accounting firms.
B) financial intermediaries.
C) government accounting agencies.
D) management consultants.
E) public accounting firms.

Question 70

Emiliano Garza spent five years in an accounting educational program and successfully completed a rigorous accounting examination five years ago. Since then, he has worked for several accounting firms. Currently he is a senior partner in a huge international accounting firm. By profession, Emiliano is probably a

A) bookkeeper.
B) certified public accountant.
C) marketing manager.
D) vice president of finance.
E) private accountant.

Question 71

Because of the Sarbanes-Oxley Act, accountants must maintain financial documents and audit work for

A) six months.
B) one year.
C) three years.
D) five years.
E) ten years.

Question 72

Jane Cook started a small manufacturing firm two years ago. Now, after two years, she decides it is time to hire an accountant to work in the office and process all her financial data. This accountant will be a

A) certified auditor.
B) certified bookkeeper.
C) managerial bookkeeping clerk.
D) private accountant.
E) public accountant.

Question 73

The ___ created the IFRS, accounting standards used in more than 100 countries.

A) Generally Accepted Accounting Principles
B) International Accounting Standards Boards
C) Financial Accounting Standards Board
D) Certified Public Accountant
E) Security and Exchange Commission

Question 74

Which of the following statements about the Sarbanes-Oxley Act is incorrect?

A) The act was passed in 1996.
B) Because the act is complex, compliance is more expensive and time consuming for corporate management.
C) Because of the act, the SEC was required to establish a federal oversight board.
D) Because of the act, a corporation's chief executive and financial officers must certify financial reports.
E) The act strengthened the penalty for destroying financial documents related to an audit.

Question 75

A public corporation must change its lead auditing firm

A) every year.
B) every two years.
C) every five years.
D) every ten years.
E) whenever it wants to.

Question 76

In order for The Gift Market, a local specialty store, to purchase Christmas merchandise for selling in its store, it had to borrow money from a local bank. This debt owed to the bank is a(n)

A) liability.
B) expense.
C) owners' equity.
D) asset.
E) credit.

Question 77

Chase invests $5,000 of his own money in his new auto detailing business. He then obtains a loan and builds a small workshop in his backyard for $10,000. At this point assets are ____, liabilities are ____, and owners' equity is ____.

A) $10,000; $5,000; $15,000
B) $15,000; $10,000; $5,000
C) $5,000; $0; $5,000
D) $15,000; $10,000; $0
E) $10,000; $5,000; $5,000

Question 78

Ebony Jones is hired by Ruby Tuesday to help with budgeting, determining the costs of the firm's meal services, and recording transactions and creating financial statements. Ebony is a

A) private accountant.
B) budget manager.
C) public accountant.
D) clerk
E) public auditor.

Question 79

The resources owned by David's Spa and Salon total $148,000. The total amount of debt that it owes to others is $87,000. Which of the following about David's Spa and Salon is true?

A) Owners' equity is $87,000.
B) Owners' equity is $61,000.
C) Liabilities are $148,000.
D) Liabilities are $61,000.
E) The firm has more owners' equity than liabilities.

Question 80

Debts owed by a business are called

A) assets.
B) expenses.
C) liabilities.
D) equities.
E) revenues.