Test Bank Ch16 Understanding Accounting And Financial - Contemporary Business 19e | Practice Test Bank by Louis E. Boone. DOCX document preview.
Package Title: Chapter 16, Testbank
Course Title: Boone, Contemporary Business, 19th Edition
Chapter Number: 16
Question type: Multiple Choice
1) The claims of a company’s creditors are a(n) _____.
a) asset
b) liability
c) owners’ equity
d) budget
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
2) The _____ is a statement of a company’s financial position on a particular date.
a) owners’ equity
b) accounting equation
c) balance sheet
d) income statement
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
3) The accounting method that records revenues and expenses when they occur is called _____.
a) International Financial Reporting Standards
b) accrual accounting
c) open book management
d) generally accepted accounting principles (GAAP)
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
4) _____ is the owner’s initial investment in the business plus profits that were not paid out to owners over time in the form of cash dividends.
a) Asset
b) Owners’ equity
c) Income
d) Budget
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
5) The basic relationship that states assets equal liabilities plus owners’ equity is called the _____.
a) accounting equation
b) balance sheet
c) income statement
d) budget
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
6) The _____ created the Public Accounting Oversight Board and increased the reporting requirements for publicly traded companies.
a) Sarbanes-Oxley Act (SOX)
b) generally accepted accounting principles (GAAP)
c) Financial Accounting Standards Board (FASB)
d) International Accounting Standards Committee (IASC)
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
7) A financial record of a company's revenues, expenses, and profits over a specific period of time is called the _____.
a) owners’ equity
b) balance sheet
c) income statement
d) budget
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
8) A(n) _____ requires a minimum of a bachelor’s degree; 150 hours of education and experience; and the completion of a number of rigorous tests in accounting theory and practice, auditing, law, and taxes.
a) certified public accountant
b) International Financial Reporting accountant
c) accrual accountant
d) management accountant
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
9) The _____ are regulations and interpretations adopted by the International Accounting Standards Board.
a) International Financial Reporting Standards
b) generally accepted accounting principles (GAAP)
c) Financial Accounting Standards
d) International Accounting Standards
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
10) A(n) _____ is anything of value owned or leased by a business.
a) asset
b) liability
c) owners’ equity
d) income
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
11) Proponents of _____ allow employees to view sensitive financial information so that they better understand how their work contributes to the company's success.
a) accrual accounting
b) open book management
c) generally accepted accounting principles (GAAP)
d) management accounting
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
12) 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.
a) assets
b) liabilities
c) profitability ratios
d) leverage ratios
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
13) In the United States, the Financial Accounting Standards Board (FASB) is primarily responsible for evaluating, setting, or modifying _____.
a) International Financial Reporting Standards
b) Sarbanes-Oxley Act (SOX)
c) generally accepted accounting principles (GAAP)
d) Financial Accounting Standards
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
14) The _____ is primarily responsible for evaluating, setting, or modifying the generally accepted accounting principles.
a) International Financial Reporting Board (IFRB)
b) Generally Accepted Accounting Principles Committee (GAAPC)
c) Financial Accounting Standards Board (FASB)
d) International Accounting Standards Committee (IASC)
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
15) _____ measure the extent to which a company relies on debt financing.
a) Liability
b) Owners’ equity
c) Profitability ratios
d) Leverage ratios
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
16) A(n) _____ is employed by a business other than a public accounting firm.
a) certified public accountant
b) accrual accountant
c) open book accountant
d) management accountant
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
17) The _____ was established to promote worldwide consistency in financial reporting practices.
a) International Financial Reporting Standards
b) generally accepted accounting principles (GAAP)
c) Financial Accounting Standards Board (FASB)
d) International Accounting Standards Committee (IASC)
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
18) A(n) _____ is a planning and controlling tool that reflects a company’s expected sales revenues, operating expenses, and cash receipts and outlays.
a) balance sheet
b) income statement
c) open book management
d) budget
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
19) Which of these describes the process of measuring, interpreting, and communicating financial information to enable people inside and outside the company to make informed decisions?
a) Selling
b) Accounting
c) Operating
d) Investing
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
20) Professionals who are responsible for gathering, recording, reporting, and interpreting the financial information of an organization are known as _____.
a) statisticians
b) accountants
c) IRS agents
d) IRS agents’ managers
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
21) Astrid 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 Astrid’s job?
a) Market researcher
b) Systems analyst
c) Investor
d) Accountant
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
22) The natural progression of a business begins with _____.
a) operating
b) investing
c) financing
d) selling
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
23) Elsa owns a business and is reviewing her company's current financial statements. As a user of accounting information, Elsa is most interested in using this information to _____.
a) evaluate credit risk
b) approve new issues of stocks and bonds
c) plan and control activities
d) evaluate tax liabilities
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
24) Benicio is a loan officer for a bank and is reviewing the financial statements of a prospective borrower. As a user of accounting information, Benicio is most interested in using this information _____.
a) to plan and control daily operations
b) in contract negotiations
c) to make an investment decision and estimate its future returns
d) to evaluate financial soundness of potential clients
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
25) Which 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
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
26) Lambert manages the sales force for his company. He is engaged in the _____ activity.
a) operating
b) accounting
c) financing
d) investing
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
27) Which of these activities focus on providing valuable assets to a business?
a) Marketing
b) Investing
c) Selling
d) Operating
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
28) _____ activities focus on selling goods and services and consider expenses as part of financial management.
a) Marketing
b) Operating
c) Financing
d) Investing
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
29) A ______ provides accounting services to individuals or companies for a fee.
a) management consultant
b) public accountant
c) management accountant
d) government accountant
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
30) An accountant employed by a business other than a public accounting firm is called a ______, who typically collects and records financial transactions and prepares financial statements used by the company’s managers in decision making.
a) management consultant
b) public accountant
c) management accountant
d) government accountant
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
31) _______ at the federal level manage public funds, investigate white-collar crime, perform audits for government agencies, and stay up-to-date on emerging accounting and regulatory issues.
a) Management consultants
b) Public accountants
c) Management accountants
d) Government accountants
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
32) Carmen works as a tax accountant at a mid-sized manufacturing company. Carmen would be considered a _____.
a) management consultant.
b) public accountant.
c) management accountant.
d) government accountant.
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
33) 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
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
34) Fernando is not an employee of the Edith Corporation, but he was hired as a management consultant to provide unbiased advice about Edith Corporation's financial condition. Fernando is a(n) _____.
a) public accountant
b) government accountant
c) internal auditor
d) management accountant
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
35) Ramon works for a Christian organization that is affiliated to a church. He collects and records financial transactions and prepares financial statements, which makes him a _____.
a) not-for-profit accountant
b) government accountant
c) public accountant
d) management accountant
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
36) Salman performs professional services similar to those of a management accountant while working for the city of Portland. Salman can best be described as a _____.
a) public accountant
b) cost accountant
c) tax accountant
d) government accountant
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
37) Angelina works for a mid-sized manufacturing company. Her responsibility is to examine the company’s financial practices to ensure that records include accurate data and that the company’s operations are in compliance with federal, state, and local laws and regulations. Angelina is a(n) _____.
a) government accountant
b) cost accountant
c) tax accountant
d) internal auditor
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
38) All of the following are assets EXCEPT _____.
a) inventory
b) cash
c) patents
d) bank loans
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
39) Which principles encompass the conventions, rules, and procedures for determining acceptable accounting and financial reporting practices at a particular time?
a) SOX
b) IASB
c) GAAP
d) FASB
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
40) To provide reliable, consistent, and unbiased information to decision makers, accountants follow guidelines, or standards, known as _____.
a) the accounting process
b) the accounting system
c) generally accepted accounting principles (GAAP)
d) Financial Accounting Standards Board (FASB)
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
41) In the United States, ______ is primarily responsible for evaluating, setting, or modifying GAAP.
a) SOX
b) IASB
c) IFRS
d) FASB
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
42) All of the following are tangible assets EXCEPT _____.
a) cash
b) patents
c) building
d) inventory
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
43) Who appoints the members of the Public Company Accounting Oversight Board?
a) FASB
b) American Association of CPAs
c) Federal Trade Commission
d) Securities and Exchange Commission
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
44) The procedure used by accountants to convert data about individual transactions to financial statements is called _____.
a) the cash flow method
b) the statement of owners’ equity
c) the accounting cycle
d) the balance sheet
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
45) The _____ was created by the Sarbanes-Oxley Act of 2002.
a) Securities & Exchange Commission
b) Public Accounting Oversight Board
c) GAAP
d) FASB
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
46) A(n) _______ is anything of value owned or leased by a business.
a) owners’ equity
b) asset
c) liability
d) accounts payable
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
47) A(n) ________ of a business is anything owed to creditors—that is, the claims of a company’s creditors.
a) owners’ equity
b) asset
c) liability
d) accumulated profits not paid in dividends
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
48) ________ is the owner’s initial investment in the business plus profits that were not paid out to owners over time in the form of cash dividends.
a) Owners’ equity
b) Asset
c) Liability
d) Cash
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
49) 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
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
50) All of the following are liabilities EXCEPT _____.
a) accumulated profits not paid in dividends
b) accounts payable
c) bank loans
d) wages payable
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
51) Cumberland 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
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
52) 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
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
53) Altoona 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
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Medium
54) Which of the following financial statements shows a company’s financial position on a particular date?
a) Statement of changes in retained earnings
b) Income statement
c) Statement of cash flows
d) Balance sheet
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
55) Whereas the ______ reflects a company’s financial situation at a specific point in time, the ____ indicates the flow of resources that reveals the performance of the organization over a specific time period.
a) statement of changes in retained earnings; balance sheet
b) income statement; balance sheet
c) statement of cash flows; income statement
d) balance sheet; income statement
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
56) Which of the following financial statements is also called a profit and loss statement?
a) Statement of changes in retained earnings
b) Income statement
c) Statement of cash flows
d) Balance sheet
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
57) Meryl is a corporate certified public accountant (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
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
58) Leonardo, chief financial officer for a company, wants to take a look at the summary of expenses, revenues, and profits of the firm for the most recent quarter. He can best find this information by consulting the _____.
a) balance sheet
b) cash flow statement
c) statement of owners’ equity
d) income statement
Difficulty: Medium
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
59) Nicole is the Executive Director of a local food bank and is assessing the financial situation of her not-for-profit organization. Nicole 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
Difficulty: Medium
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
60) Excel Corporation 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) October
Difficulty: Medium
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
61) 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
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
62) Amelia asked her accountant to prepare a summary of the company’s “bottom line.” What specific information is Amelia 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
Difficulty: Medium
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
63) Which of the following is a noncash expense?
a) Depreciation
b) Operating costs
c) Income taxes
d) Cost of goods sold
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
64) Which of the following current assets is NOT included when calculating the acid-test ratio?
a) Inventory
b) Short-term investments
c) Cash
d) Accounts receivable
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
65) Ricardo 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
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
66) 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
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
67) Last year, ABC Tools 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. ABC’s _____ has _____.
a) profitability; improved
b) profitability; deteriorated
c) liquidity; improved
d) liquidity; deteriorated
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
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
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
69) Using the following balance sheet information, find the firm's acid-test ratio.
Cash and marketable securities | $20 million |
Accounts receivable | $10 million |
Inventory | $30 million |
Current liabilities | $30 million |
a) 0.60
b) 1.00
c) 1.40
d) 2.00
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
70) 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
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
71) A firm has total assets of $50 million and owner's equity of $40 million. What is the firm's debt ratio?
a) 70%
b) 50%
c) 30%
d) 20%
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Analysis
72) Which ratios are designed to evaluate a firm’s ability to generate revenues in excess of operating costs and other expenses?
a) Activity
b) Liquidity
c) Profitability
d) Debt
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
73) All of the following are profitability ratios EXCEPT _____.
a) inventory turnover
b) return on equity
c) net profit margin
d) gross profit margin
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
74) If Simone Enterprises has a debt ratio of 40%, 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
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
75) Bianca 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. Bianca wants to create a(n) _____.
a) sales forecast
b) statement of cash flows
c) income statement
d) budget
Difficulty: Medium
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
76) Which of the following do companies prepare on a monthly basis?
a) Shareholders’ equity
b) Credit statement
c) Cash budget
d) Statement of cash flows
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
77) 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 a standard by which estimated performance is compared.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
78) Which of the following is true of Mint.com?
a) It is an online tool for managing personal finances.
b) It tracks a company’s cash inflows and outflows.
c) It is a complex and sophisticated budgeting system.
d) It promotes worldwide consistency in financial reporting practices.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
79) What happens when the value of the U.S. dollar drops?
a) The earnings of a U.S. company with national operations increase.
b) The earnings of a U.S. company with national operations decrease.
c) The earnings of a U.S. company with international operations increase.
d) The earnings of a U.S. company with international operations decrease.
Difficulty: Medium
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
80) Which of the following was established in 1973 to promote worldwide consistency in financial reporting practices?
a) FASB
b) IASC
c) The World Bank
d) GAAP
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
81) The CEO of an online retail store plans to share all financial information with the company’s employees. The CEO believes that in doing so, employees will understand how they contribute to the success of the company. The CEO, in this scenario, is implementing _____.
a) knowledge management
b) double-entry bookkeeping
c) open book management
d) on-demand computing
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
82) Jones Corp, an apparel company, has total assets worth $8,500. The owners’ initial investment in Jones Corp. stood at $4,000, and profits that were not paid out to owners over time was at $2,000. Calculate the total liabilities.
a) $10,500
b) $6,500
c) $4,500
d) $2,500
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
83) Rodrigues Inc., a construction company, recorded a gross profit of $12,000. Its operating expenses stood at $2,000. The amount of depreciation was calculated to be $3,000. Rodrigues paid out $2,500 in income taxes. Which of the following figures captures Rodrigues’ bottom line?
a) $10,000
b) $4,500
c) $3,500
d) $7,000
Difficulty: Medium
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
84) Marks Inc. an online retail store, recorded an inventory of $3,000 as of December 31, 2012. Its inventory stood at $3,500 on December 31, 2013. The cost of goods sold for the corresponding year was $15,000. Which of the following indicates the inventory turnover ratio of Marks Inc.?
a) 5
b) 4.28
c) 4.61
d) 5.22
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
85) The assets seen in a balance sheet are in descending order of _____.
a) liabilities
b) leverage ratio
c) liquidity
d) acid-test ratio
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
86) Which of the following is an accounting software?
a) Linux
b) Windows Vista
c) Microsoft Azure
d) NetSuite
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
Question type: True/False
87) The language of business is accounting.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
88) Accounting information can be as important to those outside the organization as it is to those inside the organization.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
89) Daily business decisions are generally unaffected by accounting information; long-term decisions, however, are affected by accounting information and the interpretation of financial reports.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
90) Even today, most companies refuse to share any financial information with employees.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
91) The natural progression of a business begins with operating the business.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
92) Accountants play fundamental roles in not only business but also other aspects of society.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
93) Accountants play a role in all three business activities: financing, investing, and operating.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
94) Financing activities focus on providing valuable assets required to run a business.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
95) Yashmi is involved in obtaining new funds to run and expand the business. She is engaged in an investing activity.
Difficulty: Medium
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
96) Lorna is an accountant who works for a firm providing auditing services to other businesses. Lorna is a public accountant.
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
97) Investing activities focus on selling goods and services, but they also consider cost control as an important element of sound financial management.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
98) Public accountants are typically employees of the firm for which they are providing services.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
99) Gus is an accountant and works for a firm that provides tax planning and preparation services to other businesses. Gus is a management accountant.
Difficulty: Medium
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
100) Not-for-profit organizations use only public accountants.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
101) An accountant employed by a business other than a public accounting firm is called a management accountant.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
102) Government accountants and those who work for not-for-profit organizations perform professional services similar to those of management accountants.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
103) Few not-for-profit organizations publish financial information since they are not required by law to do so.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
104) One of the fastest growing segments of accounting practice is the not-for-profit sector.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
105) Assets can include intangible possessions such as patents and trademarks.
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
106) The GAAP standard of relevance ensures that one firm's financial statements can be compared with those of similar businesses.
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
107) The Securities and Exchange Commission is the chief federal regulator of financial markets and the accounting industry.
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
108) Assume a company buys a machine worth $1 million and pays for it by borrowing the funds from a bank. The firm's assets will rise by $1 million and its liabilities will decrease by $1 million.
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
109) A firm has $15 million in assets and $5 million in owner's equity. Therefore, the firm must also have $15 million in liabilities.
Difficulty: Medium
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
110) Double-entry bookkeeping refers to the process by which accounting transactions are recorded.
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
111) The balance sheet is based on the accounting equation.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
112) A firm's balance sheet shows its financial position over a period of time.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
113) On a balance sheet, total assets must always equal the sum of liabilities and owners’ equity.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
114) The right side of the balance sheet lists claims against assets.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
115) The four principal financial statements are the balance sheet, income statement, statement of cash flows, and the statement of retained earnings.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
116) When examining a statement of cash flows, investors obtain relevant information about a firm’s cash receipts and payments for its operations, investments, and financing during an accounting period.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
117) Depreciation is reported as an expense on the firm’s income statement, but it does not involve any actual cash.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
118) Accrual accounting recognizes revenues and expenses when cash changes hands.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
119) The current ratio is a type of leverage ratio.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
120) Ratios assist managers by interpreting actual performance and making comparisons with what should have happened.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
121) A firm's acid-test ratio can never be higher than its current ratio.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
122) Two commonly used liquidity ratios are the inventory turnover ratio and the leverage ratio.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
123) A firm has $12 million in current assets, of which $8 million is inventory. If the company has $4 million in current liabilities, then its current ratio equals 1.0.
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
124) Return on equity is a profitability ratio.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
125) Profitability ratios measure a firm's ability to meet its short-term obligations.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
126) If a firm has an asset turnover ratio of 2.00, it means that it needs $2 in assets to generate a $1 in sales.
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
127) A debt ratio of 20% means that the firm is relying more on borrowed money than owners’ equity.
Difficulty: Medium
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
128) A budget is essentially a long-term financial plan.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
129) The budget establishes the standards with which actual performance may be compared.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
130) A company’s overall operating budget is a composite of many individual budgets for separate units of the firm.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
131) Cash budgets are typically prepared on a weekly basis.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
132) An international firm’s consolidated financial statements must reflect any gains or losses due to changes in exchange rates during specific periods of time.
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
133) If a U.S. company has substantial operations in Europe and the value of the euro falls relative to the U.S. dollar, the company's revenues, stated in U.S. dollars, will also fall.
Difficulty: Medium
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Application
Question type: Essay
134) Define accounting. Provide examples of tasks that accountants perform.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
135) Differentiate between public accountants and management accountants.
Difficulty: Easy
Learning Objective 1: 16-02: Describe accounting professionals.
Section Reference 1: Accounting Professionals
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
136) List and describe the three basic business activities performed by all organizations.
Difficulty: Easy
Learning Objective 1: 16-01: Discuss the users of accounting information.
Section Reference 1: Users of Accounting Information
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
137) What is GAAP? Explain its purpose.
Difficulty: Easy
Learning Objective 1: 16-03: Identify the foundation of the accounting system.
Section Reference 1: The Foundation of the Accounting System
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
138) Describe the accounting equation.
Difficulty: Easy
Learning Objective 1: 16-04: Outline the steps in the accounting cycle.
Section Reference 1: The Accounting Cycle
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
139) Discuss the responsibilities of accountants.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
140) List and briefly describe the four categories of financial ratios.
Difficulty: Easy
Learning Objective 1: 16-06: Discuss financial ratio analysis.
Section Reference 1: Financial Ratio Analysis
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
141) Explain the purpose of budgets in a business.
Difficulty: Easy
Learning Objective 1: 16-07: Describe the role of budgeting.
Section Reference 1: Budgeting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
142) Describe the utility of the balance sheet. Explain how it is organized.
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Knowledge
143) Define accrual accounting. How does depreciation affect net income and cash flow?
Difficulty: Easy
Learning Objective 1: 16-05: Explain financial statements.
Section Reference 1: Financial Statements
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
144) Describe how exchange rates influence international accounting practices.
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
145) How do the International Financial Reporting Standards (IFRS) and GAAP differ?
Difficulty: Easy
Learning Objective 1: 16-08: Outline international accounting practices.
Section Reference 1: International Accounting
Standard 1: AACSB || Analytic
Standard 2: Bloom’s || Comprehension
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