Deck 15: Understanding Accounting and Financial Statements

Question 1

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A(n)_____ is anything of value owned or leased by a business.

Answer 1

C

Question 2

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The _____ was established to promote worldwide consistency in financial reporting practices.

Answer 2

P

Question 3

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The accounting method that records revenues and expenses when they occur is called _____.

Answer 3

J

Question 4

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
_____ is primarily responsible for evaluating,setting,or modifying the generally accepted accounting principles.

Question 5

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A claim against a firm's assets by a creditor is a(n)_____.

Question 6

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The basic relationship that states assets equal liabilities plus owners' equity is called the _____.

Question 7

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
Financial statements are prepared according to _____,whose principles encompass the conventions,rules,and procedures for determining acceptable accounting practices at a particular time.

Question 8

What is accounting? Provide examples of tasks that accountants perform.

Question 9

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The _____ is a statement of a firm's financial position on a particular date.

Question 10

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
An organization's overall financial performance is measured by its _____,which evaluates the ability to generate revenues in excess of operating costs and other expenses.

Question 11

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The _____ is the federal law that prohibits U.S.citizens and companies from bribing foreign officials in order to win or continue business.

Question 12

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
_____ represents the owners' initial investment in the business plus profits that were not paid out to owners over time in the form of cash dividends.

Question 13

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A(n)_____ is a planning and controlling tool that reflects the firm's expected sales revenues,operating expenses,and cash receipts and outlays.

Question 14

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A(n)_____ demonstrates his or her accounting knowledge by meeting state requirements for education and experience,as well as successfully completing a number of rigorous tests in accounting theory and practice,auditing,law,and taxes.

Question 15

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A financial record of a company's revenues,expenses,and profits over a period of time is called the _____.

Question 16

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
The _____ are regulations and interpretations adopted by the International Accounting Standards Board.

Question 17

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
_____ measures the extent to which a firm relies on debt financing.

Question 18

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
Proponents of _____ allow employees to view sensitive financial information so that they better understand how their work contributes to the company's success.

Question 19

All organizations perform three basic business activities.List and describe these activities.

Question 20

MATCHING
Complete the following using the terms listed.
a.certified public accountant
b.International Financial Reporting Standards
c.Asset
d.Liability
e.owners' equity
f.accounting equation
g.balance sheet
h.income statement
i.Foreign Corruption Practices Act
j.accrual accounting
k.open book management
l.budget
m.GAAP
n.FASB
o.profitability ratio
p.International Accounting Standards Committee (IASC)
q.leverage ratio
r.management accountant
A(n)_____ is employed by a business other than a public accounting firm.

Question 21

Sri manages the sales force for his company.He is engaged in the ________ activity.

A)operating
B)accounting
C)financing
D)investing

Question 22

Describe the purpose of budgets in a business.

Question 23

Explain the accounting equation.

Question 24

________ activities provide the necessary funds to start a business and to expand it after it begins operations.

A)Selling
B)Financing
C)Operating
D)Investing

Question 25

Julie is evaluating which state her company will expand into next.She is engaged in the ________ activity.

A)accounting
B)operating
C)marketing
D)investing

Question 26

Explain the purpose of the Sarbanes-Oxley Act.

Question 27

The natural progression of a business begins with ________.

A)operating
B)investing
C)financing
D)selling

Question 28

Olga owns a business and is reviewing her company's current financial statements.As a user of accounting information,Olga is most interested in using this information to ________.

A)evaluate credit risk
B)approve new issues of stocks and bonds
C)plan and control
D)evaluate tax liabilities

Question 29

Public accountants typically perform all of the following tasks for a business client EXCEPT ________.

A)tax planning
B)reviewing a firm's financial statements
C)developing the firm's marketing strategy
D)management consulting

Question 30

________ activities focus on selling goods and services.

A)Marketing
B)Operating
C)Financing
D)Investing

Question 31

Explain the differences between public accountants and management accountants.

Question 32

________ activities focus on providing valuable assets to a business.

A)Marketing
B)Investing
C)Selling
D)Operating

Question 33

Professionals who are responsible for gathering,recording,reporting,and interpreting the financial information of an organization are ________.

A)statisticians
B)accountants
C)IRS agents
D)IRS agents managers

Question 34

What is accrual accounting? How does depreciation affect net income and cash flow?

Question 35

Identify and briefly describe the four categories of financial ratios.

Question 36

Ricardo is a loan officer for a bank and is reviewing the financial statements of a prospective borrower.As a user of accounting information,Ricardo is most interested in using this information ________.

A)to plan and control
B)in contract negotiations
C)to make an investment decision
D)evaluate credit risk

Question 37

Explain how exchange rates influence international accounting practices.Why was the International Accounting Standards Committee established?

Question 38

Define GAAP and explain its purpose.

Question 39

Melissa works for a travel agency.Her job involves preparing financial reports and interpreting those reports to provide information for decision making.Which title is appropriate for Melissa's job?

A)auditor
B)systems analyst
C)investor
D)accountant

Question 40

What is the purpose of the balance sheet? Explain how it is it organized.

Question 41

A(n)________ is a financial statement that is directly based on the accounting equation.

A)balance sheet
B)income statement
C)statement of cash flows
D)statement of changes in retained earnings

Question 42

Camden Products buys a $500,000 machine by taking out a bank loan.The company's assets will ________ by $500,000 while its liabilities will ________ by $500,000.

A)rise;rise
B)fall;fall
C)rise;fall
D)fall;rise

Question 43

All of the following are liabilities EXCEPT ________.

A)accumulated profits not paid in dividends
B)accounts payable
C)bank loans
D)wages payable

Question 44

The rules followed by accountants when preparing financial statements are referred to as ________.

A)the accounting process
B)the accounting system
C)Generally Accepted Accounting Practices (GAAP)
D)Financial Accounting Standards Board (FASB)

Question 45

Makayla is a corporate CPA working on a new budget.When she lists the company's liabilities,which of the following will she include?

A)computer software
B)owners' equity
C)marketable securities
D)employees' wages and salaries

Question 46

Milwaukee Fabrication has $80 million in assets and $50 million in owners' equity.How much does the firm have in liabilities?

A)$80 million
B)$50 million
C)$30 million
D)$20 million

Question 47

Fayez performs professional services similar to those of a management accountant,while working for the city of Portland.Fayez can best be described as a ________.

A)public accountant
B)cost accountant
C)tax accountant
D)government accountant

Question 48

Which of the following financial statements shows a firm's financial position at a particular date?

A)statement of changes in retained earnings
B)income statement
C)statement of cash flows
D)balance sheet

Question 49

The ________ was created by the Sarbanes-Oxley Act of 2002.

A)Securities & Exchange Commission
B)Public Accounting Oversight Board
C)GAAP
D)FASB

Question 50

What is the primary role of a government accountant?

A)preparing the organization's tax return
B)determining how much money the organization is taking in
C)determining the cost of goods and services provided by the organization
D)determining how efficiently the organization accomplishes its objectives

Question 51

Samantha works for a mid-sized manufacturing company.Her responsibility is to examine the firm's financial practices to ensure that records include accurate data and that the firm's operations are in compliance with federal,state,and local laws and regulations.Samantha is a ________.

A)government accountant
B)cost accountant
C)tax accountant
D)internal auditor

Question 52

All of the following are assets EXCEPT ________.

A)inventory
B)cash
C)patents
D)bank loans

Question 53

The procedure used by accountants to convert transactions into financial statements is called ________.

A)recording financial information
B)processing financial information
C)the accounting cycle
D)summarizing financial information

Question 54

Raphael works as a tax accountant at a mid-sized manufacturing company.Raphael would be considered a ________.

A)management consultant
B)public accountant
C)management accountant
D)government accountant

Question 55

Emilio is not an employee of the Modesto Corporation,but was hired as a management consultant to provide unbiased advice about Modesto's financial condition.Emilio is a(n)________.

A)public accountant
B)government accountant
C)internal auditor
D)management accountant

Question 56

Who appoints the members of the Public Accounting Oversight Board?

A)FASB
B)American Association of CPAs
C)Federal Trade Commission
D)Securities and Exchange Commission

Question 57

Jackson,chief financial officer for a company,is interested in a summary of all the costs related to producing revenues for the most recent quarter.He can best find this information by consulting the ________ section of the ________.

A)current asset;balance sheet
B)operating;cash flow statement
C)current liability;balance sheet
D)expense;income statement

Question 58

All of the following are tangible assets EXCEPT ________.

A)cash
B)patents
C)buildings
D)inventory

Question 59

Jenna asked her accountant to prepare a summary of the company's "bottom line." What specific information is Jenna interested in?

A)comparison of assets and liabilities
B)the company's financial position for that week
C)net income after taxes
D)statement of owners' equity

Question 60

Which of the following represents the accounting equation?

A)Assets + Liabilities = Owners' Equity
B)Assets = Liabilities + Owners' Equity
C)Liabilities = Assets + Owners' Equity
D)Owners' Equity - Liabilities = Assets

Question 61

Daniel wishes to create a financial blueprint for a future period that reflects such items as expected sales revenues,operating expenses,and cash receipts and disbursements.Daniel wants to create a(n)________.

A)sales forecast
B)statement of cash flows
C)income statement
D)budget

Question 62

Kate is the Executive Director of a local food bank and is assessing the financial situation of her not-for-profit organization.Kate uses a(n)________ to determine whether revenues from contributions and other sources will cover operating costs.

A)statement of cash flows
B)income statement
C)balance sheet
D)accrual accounting

Question 63

A firm has total assets of $50 million and owner's equity of $40 million.What is the firm's debt ratio?

A)70 percent
B)50 percent
C)30 percent
D)20 percent

Question 64

If a firm has a current ratio of 2.5,it means that for every $2.50 in ________ it has $1.00 in ________.

A)current assets;current liabilities
B)total assets;total liabilities
C)current assets;total liabilities
D)total assets;current liabilities

Question 65

Kwane wants to assess his firm's ability to meet its short-term obligations.Which of the following ratios are the most relevant?

A)activity ratios
B)debt ratios
C)liquidity ratios
D)profitability ratios

Question 66

Using the following balance sheet information,find the firm's acid-test ratio.

A)0.60
B)1.00
C)1.40
D)2.00

Question 67

Expenses that have been incurred (such as wages)but have yet to be paid,are reported on the balance sheet as ________.

A)accruals
B)accounts receivable
C)accounts payable
D)notes payable

Question 68

If a company has an acid test ratio of 1.00,$5 million in inventory,and $10 million in current liabilities,what are its total current assets?

A)$5 million
B)$10 million
C)$15 million
D)$20 million

Question 69

The Ming Company sells $1,000 worth of goods on July 25 on credit.The customer sends the company a check on August 15.The customer receives the goods on September 1.Assuming the company uses accrual accounting,the sale will be recorded in ________.

A)August
B)July
C)September
D)either July,August,or September

Question 70

Last year,a firm had a current ratio of 2.0 and an acid-test ratio of 1.0.This year the firm's current ratio is 2.5 and its acid-test ratio is 1.5.This firm's ________ has ________.

A)profitability;improved
B)profitability;deteriorated
C)liquidity;improved
D)liquidity;deteriorated

Question 71

Which of the following is a non-cash expense?

A)depreciation
B)operating costs
C)income taxes
D)cost of goods sold

Question 72

An asset turnover ratio of 2.5 means that for every $1 in assets,the firm generates ________ in sales.

A)$0.50
B)$2.00
C)$2.50
D)$3.00

Question 73

All of the following are profitability ratios EXCEPT ________.

A)inventory turnover
B)return on equity
C)return on assets
D)gross profit margin

Question 74

Which of the following assets would be listed first on the assets side of a balance sheet?

A)accounts receivable
B)goodwill
C)fixed assets
D)inventory

Question 75

Cash budgets include all of the following EXCEPT ________.

A)an analysis of interest on cash earned from company profits
B)a statement of the company's cash inflows and outflows
C)an indication when the company can invest excess funds in securities
D)a tangible standard against which to compare actual cash inflows and outflows

Question 76

If Topeka Enterprises has a debt ratio of 40 percent,it means that for every $1 in ________,the firm has 40 cents in ________.

A)owners' equity;liabilities
B)assets;liabilities
C)owners' equity;assets
D)assets;owners' equity

Question 77

Which of the following current assets is NOT included when calculating the acid-test ratio?

A)inventory
B)marketable securities
C)cash
D)accounts receivable

Question 78

Cash budgets are usually prepared ________.

A)yearly
B)quarterly
C)monthly
D)weekly

Question 79

Which of the following statements is correct?

A)Budgets are limited to projecting cash inflows and outflows.
B)Budgets serve as a planning and control tool.
C)GAAP standards are used in budget development.
D)Budgets serve as the standard by which estimated performance is compared.

Question 80

________ ratios are designed to indicate how successful a firm is in terms of its earnings as compared with its assets or owners' equity.

A)Activity
B)Liquidity
C)Profitability
D)Debt