Question 1

The Barkley Company has several automobiles that are used in the business.Recently,the owners were told that even though the government permits the firm to depreciate the vehicles,it is not a deductible expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

As a recent college graduate with a degree in accounting,Jeff is helping a newly formed construction company set up its accounting system.Although the company had purchased accounting software,Jeff wants to make certain that future reports will distinguish between current liabilities and long-term liabilities.In the future,he will need to know the amount of total current liabilities in order to ____________________.

Accepted Answer

A) know when it is time to make a long-term mortgage payment ities. 
B) calculate if the company has purchased too much inventory for home building. 
C) analyze whether the company can afford to make capital purchases such as additional land acquisition. 
D) analyze whether the company has enough funds to pay the near term bills.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ________ ratios.

Accepted Answer

A) leverage 
B) liquidity 
C) activity 
D) profitability

Question 6

The statement of cash flows calculates cash flows from operations,investing activities,and financing activities.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The firm's most valuable assets are listed at the top of its balance sheet.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The preparation of financial statements for people outside the firm creditors,unions,suppliers,and others)is the goal of:

Accepted Answer

A) Auditing. 
B) Financial accounting. 
C) Managerial accounting. 
D) Cost accounting.

Question 11

The basic earnings per share ratio does not take stock options,warrants,and preferred stock into account.

Accepted Answer

A) True 
 B)False

Question 12

An analysis of the statement of cash flows can help a firm prevent cash shortages.

Accepted Answer

A) True 
 B)False

Question 13

Careful consideration of the use of computers in accounting indicates that computers _____________________.

Accepted Answer

A) will soon eliminate all of the accounting functions 
B) are tools to help the accountant perform his or her job 
C) are of little use to small-business owners that need accounting services 
D) have a very limited use in accounting due to inadequate privacy controls

Question 14

Earnings per share,return on sales,and return on equity are examples of:

Accepted Answer

A) leverage ratios. 
B) liquidity ratios. 
C) equity ratios. 
D) profitability ratios.

Question 15

A balance sheet lists assets in order of their _______________.

Accepted Answer

A) Dollar value,from smallest to largest 
B) Date of acquisition,with the most recently acquired assets listed first 
C) Liquidity,with the most liquid assets listed first 
D) Income generating ability

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Leverage ratios indicate the extent to which ________ has been used to fund a business's operations.

Accepted Answer

A) debt 
B) equity 
C) owner invested capital 
D) profit

Question 18

General expenses include office salaries,rent,and insurance.

Accepted Answer

A) True 
 B)False

Question 19

Accountants record,classify,and ____________ the results of the financial information they gather.

Accepted Answer

A) interpret 
B) sell 
C) buy 
D) change

Question 20

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.

Accepted Answer

A) inventory valuation 
B) declining balance 
C) appreciation 
D) depreciation

Exam 17: Understanding Accounting and Financial Information

The Barkley Company has several automobiles that are used in the business.Recently,the owners were told that even though the government permits the firm to depreciate the vehicles,it is not a deductible expense on the income statement.

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

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

Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ________ ratios.

The statement of cash flows calculates cash flows from operations,investing activities,and financing activities.

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

The firm's most valuable assets are listed at the top of its balance sheet.

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

The preparation of financial statements for people outside the firm creditors,unions,suppliers,and others) is the goal of:

The basic earnings per share ratio does not take stock options,warrants,and preferred stock into account.

An analysis of the statement of cash flows can help a firm prevent cash shortages.

Careful consideration of the use of computers in accounting indicates that computers _____________________.

Earnings per share,return on sales,and return on equity are examples of:

A balance sheet lists assets in order of their _______________.

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

Leverage ratios indicate the extent to which ________ has been used to fund a business's operations.

General expenses include office salaries,rent,and insurance.

Accountants record,classify,and ____________ the results of the financial information they gather.

Nebraska Communications is considering the purchase of a new satellite.The firm believes the satellite will help generate future earnings.In addition,the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.