Deck 15: Using Management and Accounting Information

Question 1

Managerial accounting generates financial statements and reports for interested people outside an organization.

Answer 1

False

Question 2

Typically,the majority of the data gathered for an MIS come from external sources.

Answer 2

False

Question 3

Audited financial statements guarantee that a firm has not "cooked" the books.

Answer 3

False

Question 4

Resources that a firm owns are classified as assets.

Question 5

Because information rules must be checked out before a decision can be made,they lengthen the time required to analyze choices.

Question 6

A private accountant is an accountant whose services may be hired on a fee basis by individuals or business firms.

Question 7

A public accountant works on a fee basis for clients.

Question 8

While chief executives and financial officers are currently not subject to criminal penalties,they are required to certify periodic financial reports.

Question 9

The debts of a business are called its liabilities.

Question 10

According to the accounting equation,cash,inventory,equipment,and real estate are classified as owners' equity.

Question 11

Knowledge management is a firm's procedures for using computer software to solve business problems.

Question 12

Multinational corporations do not have the responsibility nor the incentive to follow international accounting standards as there still is no particular set of global standards that are generally accepted worldwide.

Question 13

A person who wishes to practice accounting as a CPA must pass an exam prepared by the American Institute of Certified Public Accountants (AICPA).

Question 14

According to the Sarbanes-Oxley Act,the FTC is required to establish a full-time,five-member federal oversight board that will police the accounting industry.

Question 15

There is added protection for whistle-blowers who report violations of the Sarbanes-Oxley Act.

Question 16

Management and employees are the groups that would be most likely to evaluate the risk associated with investing in a company's stocks,bonds,or securities.

Question 17

Individuals or organizations outside of a company will never have the need or desire to view information on another company's finances.

Question 18

A firm's MIS data bank should include all past and current data that may be useful in managing the firm.

Question 19

Data are always in numerical form.

Question 20

Without the audit function and GAAP,there would be very little oversight or supervision of corporate accounting practices.

Question 21

The ending cash balance reported on the statement of cash flows is the same as the net sales amount reported on the firm's income statement.

Question 22

An accountant can calculate a return on sales ratio to determine how well the firm is using the money invested by the owners.

Question 23

Current assets are assets that can be converted quickly into cash or that will be used in two years or less.

Question 24

Managers often compare financial and accounting data with previous accounting periods and with competing firms.

Question 25

Net income is the profit earned (or the loss suffered)by a firm during an accounting period after the cost of goods sold and all expenses have been deducted from revenues.

Question 26

Debts that will be repaid in one year or less are known as current liabilities.

Question 27

Equipment and patents are known as intangible assets.

Question 28

In 1987,the Securities and Exchange Commission (SEC)and the Financial Accounting Standards Board (FASB)required all publicly traded companies to include a statement of cash flows along with the balance sheet and income statement in their annual report.

Question 29

The standard form of the accounting equation is assets equal liabilities minus owners' equity.

Question 30

Long-term liabilities need not be repaid for at least one year.

Question 31

The statement of financial position presents the business firm's assets,liabilities,and owners' equity accounts at the end of an accounting period,such as on December 31,whereas the income statement summarizes operations during a specified accounting period.

Question 32

Owners' equity is the dollar value that remains after the total liabilities of a business are subtracted from its total assets.

Question 33

On a balance sheet,assets are listed in order,from the most liquid to the least liquid.

Question 34

When smart investors take a practical approach to evaluating a company's accounting information,they need only look at the snapshot data that a balance sheet offers as it will be the primary tool to guide potentially profitable investments.

Question 35

For a corporation,the owners' equity amount is the total value of stock minus the retained earnings that have accumulated to date.

Question 36

The cost of goods sold equals beginning inventory plus net purchases minus ending inventory.

Question 37

The statement of cash flows illustrates the effects on cash of the operating,investing,and financing activities of a company for an accounting period.

Question 38

The total dollar amount of all goods and services sold during the accounting period is called net sales.

Question 39

The return on sales ratio indicates how effectively a firm is transforming its sales into profits.

Question 40

The statement of financial position is also known as the balance sheet.

Question 41

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 42

A low inventory turnover can be improved by ordering merchandise in smaller quantities at more frequent intervals.

Question 43

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 44

Maddie is the CEO of Stevenson,Ross,and Warner (SRW) ,a regional accounting firm.SRW 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,SRW could be considered a violator of the Sarbanes-Oxley Act.Maddie 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 Stevenson,Ross,and Warner.One of SRW's clients is ABC Electronics.SRW 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 45

Maddie is the CEO of Stevenson,Ross,and Warner (SRW) ,a regional accounting firm.SRW 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,SRW could be considered a violator of the Sarbanes-Oxley Act.Maddie 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 Stevenson,Ross,and Warner.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 who 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 46

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 47

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 48

Maddie is the CEO of Stevenson,Ross,and Warner (SRW) ,a regional accounting firm.SRW 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,SRW could be considered a violator of the Sarbanes-Oxley Act.Maddie 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 Stevenson,Ross,and Warner.In order to be successful in the accounting industry,SRW 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 49

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 50

Maddie is the CEO of Stevenson,Ross,and Warner (SRW) ,a regional accounting firm.SRW 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,SRW could be considered a violator of the Sarbanes-Oxley Act.Maddie 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 Stevenson,Ross,and Warner.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 51

Alexa's First Job ​Alexa 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.Alexa accepted the job. Once Alexa started working,she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.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.Alexa knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Alexa's First Job.When Alexa explained the asset side of the statement,she included which of the following?

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

Question 52

Hillary 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 53

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 54

Maddie is the CEO of Stevenson,Ross,and Warner (SRW) ,a regional accounting firm.SRW 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,SRW could be considered a violator of the Sarbanes-Oxley Act.Maddie 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 Stevenson,Ross,and Warner.If you applied for a job at SRW 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 55

Alexa's First Job ​Alexa 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.Alexa accepted the job. Once Alexa started working,she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.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.Alexa knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Alexa's First Job.If the owners did not recognize the term "statement of financial position," Alexa could use which of the following more common terms?

A) income statement
B) balance sheet
C) statement of cash flow
D) statement of retained earnings
E) statement of financial ratios

Question 56

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 57

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 58

Dividing current assets by current liabilities gives the current ratio.

Question 59

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 60

Alexa's First Job ​Alexa 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.Alexa accepted the job. Once Alexa started working,she realized that the owners and employees did not have a general understanding of accounting.She had to teach them the steps in an accounting cycle so they would be able to understand how she was going to create reports.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.Alexa knows it will be a challenge to keep everyone on the same page when it comes to numbers and reports.
Refer to Alexa's First Job.To help the owners understand how effectively the firm is transforming sales into profits,Alexa 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 61

The Cheese Shoppe's liabilities total $59,000 and its owners' equity is $124,000.Which of the following is true?

A) The total assets equal $65,000.
B) The firm's assets are $124,000.
C) The current liabilities are less than the current assets.
D) The total assets equal $183,000.
E) The firm's sales are $183,000.

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 correct?

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

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 64

Resources that a firm owns are called

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

Question 65

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 66

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 67

When Kenny 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 Kenny to have his financial statements

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

Question 68

Nate Pride 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,Nate is probably a

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

Question 69

Janet owns and operates her own bakery and coffee shop.Janet 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 70

Debts owed by a business are called

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

Question 71

Sam 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 72

Amy Jones 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

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 74

Kevin Smith is hired by Leslie Porter to help with budgeting,determining the costs of the firm's meal services,and recording transactions and creating financial statements.Kevin is a

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

Question 75

All of the following are acceptable ways of stating the accounting equation except

A) owners' equity = assets − liabilities.
B) assets = liabilities + owners' equity.
C) owners' equity − liabilities = assets.
D) assets − liabilities = owners' equity.
E) assets = shareholders' equity + liabilities.

Question 76

If the liabilities of a business are $85,000 and the owners' equity is $110,000,which of the following is a correct statement?

A) Assets equal $25,000.
B) Assets equal $195,000.
C) Assets equal $110,000.
D) Assets equal $85,000.
E) It is impossible to determine the value of the assets.

Question 77

Martin's Spa and Salon's assets total $148,000.The total amount of debt that it owes to others is $87,000.Which of the following is correct?

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

Question 78

If the assets of Marco's Pet Store are $107,000 and the owners' equity is $75,000,which of the following is a correct 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 79

The information provided by managerial accounting is of most benefit to a firm's

A) investors.
B) creditors.
C) managers.
D) lenders.
E) bankers.

Question 80

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