Deck 1: Accounting Information: Users and Uses

Question 1

The emphasis in financial accounting is on which of the following external user groups?

A) Management
B) Certified public accountants
C) Investors and creditors
D) Educators

Answer 1

C

Question 2

Which of the following is true about the double-entry system of bookkeeping?

A) It was developed in the 1300s-1400s in France.
B) It was developed in the 1800s in Italy.
C) It was developed in the 1300s-1400s in Italy.
D) It was developed in the 1800s in the United States.

Answer 2

C

Question 3

The accounting cycle includes all of the following, EXCEPT:

A) Recording
B) Summarizing
C) Analyzing
D) Interpreting

Answer 3

D

Question 4

The primary internal group that uses accounting information is

A) Government agencies
B) Investors
C) Management
D) Competitors

Question 5

Which of the following is NOT an important aspect of management accounting?

A) Planning
B) Product design
C) Implementing plans
D) Controlling costs

Question 6

Which of the following is NOT a step in the decision making process?

A) Identify the issue.
B) Identify alternatives.
C) Select the option that will result in the greatest financial increase.
D) Gather information.

Question 7

Accountants typically perform what action related to the financial results of business activities?

A) Report the results of business activities
B) Advise on how to structure business activities
C) Both report the results of and advise on how to structure business activities
D) None of these are correct

Question 8

Which of the following is NOT a function of accounting?

A) Accumulating economic information about organizations
B) Measuring economic information about organizations
C) Executing sales transactions for organizations
D) Communicating economic information about organizations

Question 9

Accounting can be best described as a

A) Manufacturing activity
B) Service activity
C) Retailing activity
D) All of these are correct

Question 10

Which of the following is NOT a typical source of monetary resources for a business enterprise?

A) Investors
B) Creditors
C) Business earnings
D) Employees

Question 11

Which of the following is NOT typically true of accounting information?

A) The information is quantitative in nature.
B) The information relates to future time periods.
C) The information relates to specific accounting entities.
D) The information is primarily financial in nature.

Question 12

Which of the following financial statements reports a company's resources, obligations, and owner's equity?

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

Question 13

The area of accounting that is concerned with providing information for external users is referred to as

A) Financial accounting
B) Governmental accounting
C) Management accounting
D) Not-for-profit accounting

Question 14

Which of the following financial statements reports the excess of a company's revenues over its expenses?

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

Question 15

Which of the following is NOT one of the three primary financial statements?

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

Question 16

Which of the following is the most correct definition of accounting?

A) A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.
B) An entity without a profit objective, oriented toward providing services efficiently and effectively.
C) The preservation of a systematic, quantitative record of an activity.
D) The procedures and processes used by a company to analyze transactions and handle routine bookkeeping tasks.

Question 17

Internal reports are generally used by

A) Management
B) Suppliers
C) Lenders
D) Employees

Question 18

Which of the following is NOT a key component of the definition of accounting?

A) Financial
B) Qualitative
C) Useful
D) Decision-oriented

Question 19

Businesses use accounting systems to

A) Analyze transactions
B) Handle routine bookkeeping tasks
C) Evaluate the performance and health of the business
D) All of these are correct

Question 20

Which of the following financial statements reports the amount of cash collected and paid out by a company?

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

Question 21

The definition of accounting is a system for providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." List and explain the key components of this definition.

Question 22

The initials CPA stand for

A) Certified Professional Appraiser
B) Certified Professional Accountant
C) Certified Public Accountant
D) Certified Public Auditor

Question 23

The Sarbanes-Oxley Act created the

A) Financial Accounting Standards Board
B) Public Company Accounting Oversight Board
C) American Institute of Certified Public Accountants
D) Enron-WorldCom Fraud Committee

Question 24

Standards established by the International Accounting Standards Board are referred to as

A) Generally Accepted Accounting Standards
B) International Auditing Standards
C) International Financial Reporting Standards
D) International Financial Accounting Standards

Question 25

Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies?

A) Financial Accounting Standards Board (FASB)
B) Securities and Exchange Commission (SEC)
C) Internal Revenue Service (IRS)
D) American Institute of Certified Public Accountants (AICPA)

Question 26

Which of the following is a reason that you may need to understand accounting information in the future?

A) To evaluate an employer's short and long-term potential
B) To perform a personal budget
C) To perform responsibilities in future employment
D) All of these are reasons to study accounting

Question 27

Which of the following is NOT one of the factors that influences the accounting environment?

A) International business
B) Technology
C) The development of generally accepted accounting principles (GAAP)
D) Investors

Question 28

In 2008, the SEC began to

A) Allow U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards
B) Require U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards
C) Require non-U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards
D) Allow non-U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards

Question 29

Accountants are MOST concerned with

A) Foreign companies operating in the US
B) U.S. companies with domestic customers
C) U.S. companies with foreign customers
D) All of these are correct

Question 30

Which of the following is NOT one of the ways that technology has changed the way accounting is done?

A) Technology easily allows companies to collect large amounts of data about transactions
B) Technology allows greater access to a company's financial statements and other financial information
C) Technology is able to perform the mechanics of accounting therefore, people are not required to understand the mechanics
D) Technology allows for large amounts of data to be compiled quickly and accurately

Question 31

Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States?

A) Securities and Exchange Commission
B) Federal Accounting Standards Board
C) Internal Revenue Service
D) American Institute of Certified Public Accountants

Question 32

The initials GAAP stand for

A) General Accounting Administration Practices
B) Generally Applied Accounting Procedures
C) Generally Accepted Accounting Principles
D) Generally Accepted Accounting Practices

Question 33

Which of the following is NOT an external user of financial information?

A) Competitors
B) Employees
C) Management
D) Suppliers

Question 34

Identify and describe the functions of an accounting system.

Question 35

Generally accepted accounting principles are

A) Natural laws
B) Based on scientific proofs
C) Developed by accounting rule makers
D) None of these are correct

Question 36

The current standard-setting board for accounting in the private sector is the

A) Financial Accounting Standards Board (FASB)
B) Securities and Exchange Commission (SEC)
C) International Accounting Standards Board (IASB)
D) American Accounting Association (AAA)

Question 37

Ethics are especially important in accounting because

A) Independent accountants represent the public interest
B) Accountants can steal money more easily than other employees
C) Accountants have historically committed more company thefts than other employees
D) The accounting profession does not have a code of professional conduct

Question 38

Which of the following is NOT a service typically provided by large public accounting firms?

A) Performing audits
B) Making management decisions
C) Redesigning operating procedures
D) Establishing accounting systems

Question 39

Which of the following is NOT true of the Financial Accounting Standards Board (FASB)?

A) It consists of five full-time members
B) It is a government agency
C) It seeks consistency for its proposed standards
D) It has no legal power to enforce the standards it sets

Question 40

The organization that develops worldwide accounting standards is the

A) International Committee on Accounting Standards (ICAS)
B) International Accounting Standards Board (IASB)
C) International Board of Accounting Standards (IBAS)
D) International Accounting Standards Committee (IASC)

Question 41

Lenders, investors, and management are three potential users of external financial statements. Discuss how the information found in external financial statements can benefit each of these external users.

Question 42

Describe the major difference between internal reports and external reports.

Question 43

FASB, GAAP, SEC, CPA, AICPA, IRS, IASB, IFRS are all acronyms used in accounting. For the preceding list of acronyms, state what the acronym stands for and then give a definition of each acronym.

Question 44

List six users of accounting information and indicate whether they are an internal or an external user.

Question 45

It is often said that companies must keep two sets of books. Isn't this dishonest? Explain.

Question 46

List the four steps in the decision making process.

Question 47

Identify the three primary financial statements and discuss the content of each.