Deck 1: Accounting: the Language of Business

Question 1

Currently,generally accepted accounting principles are developed by the American Institute of Certified Public Accountants (AICPA).

Answer 1

False

Question 2

The owners and managers of a business are the only users of the financial information.

Answer 2

False

Question 3

Public accountants work on the staff of federal,state,or local governmental units.

Answer 3

False

Question 4

When a partner leaves,the partnership is dissolved and a new partnership may be formed with the remaining partners.

Question 5

Laws passed by Congress in 1933 and 1934 gave the Securities and Exchange Commission (SEC)final say on matters of financial reporting by publicly owned corporations.

Question 6

Anyone can invest in a closely held corporation.

Question 7

The financial statements and the auditor's report must be made available to stockholders of publicly owned corporations.

Question 8

The purpose of accounting is to provide financial information about an economic or social entity.

Question 9

An accounting system is designed to accumulate and classify data about a firm's financial affairs and summarize it in the general journal.

Question 10

Managerial Accounting is any activity associated with the preparation of tax returns and the audit of those returns.

Question 11

Most owners and managers rely heavily on the accountant's judgment and knowledge when making financial decisions.

Question 12

The separate entity assumption applies only to the corporate form of business.

Question 13

The Securities and Exchange Commission (SEC)requires that publicly owned corporations submit financial statements to it each year.

Question 14

As the first step in the development of generally accepted accounting principles,the FASB writes an exposure draft,which explains the topic under consideration.

Question 15

When a business is organized as a sole proprietorship,the owner should combine his/her personal financial information with the business financial information.

Question 16

The SEC uses financial information to determine a company's tax base.

Question 17

Public accounting firms provide three major types of services: auditing,tax accounting,and management advisory services.

Question 18

Accounting is defined as the process by which financial information about a business is recorded,classified,summarized,interpreted,and communicated to owners,managers,and other interested parties.

Question 19

Accountants provide financial information to various parties so they can make business decisions.

Question 20

In a sole proprietorship,the owner is responsible for the debts of the business if the firm is unable to pay.

Question 21

The financial statements submitted to the SEC by a corporation must be ____________________ by an independent accountant to ensure their fairness and adherence to generally accepted accounting principles.

Question 22

Financial information users such as owners,managers and employees,are referred to as ___________________ users.

Question 23

Accounting is often referred to as the language of ___________________.

Question 24

The three major legal forms of business entity are the sole proprietorship,the partnership,and the ___________________.

Question 25

An example of an economic entity is

A) a town.
B) a business.
C) a politician.
D) a church.

Question 26

Accountants normally choose to practice in one of three areas: public accounting,managerial accounting,or ____________________ accounting.

Question 27

The people,companies,or government agencies to whom a firm owes money are called ___________________.

Question 28

Identify which of the following are considered OUTSIDE users of financial accounting information.

A) employees
B) managers
C) owners
D) banks

Question 29

The process by which financial information about a business is recorded,classified,summarized,interpreted,and communicated to owners,managers,and other interested parties is called ___________________.

Question 30

A business partnership can have only two partners.

Question 31

Generally accepted accounting ____________________ are financial accounting standards that are changed and refined in response to changes in the environment in which businesses operate.

Question 32

The Securities and Exchange Commission (SEC)regulates the accounting methods and financial reporting of ____________________ owned corporations.

Question 33

Tax accounting is a service offered by public accounting firms that involves tax ____________________ and tax planning.

Question 34

A partnership has ____________________ or more owners.

Question 35

The results of the accounting process are summarized in periodic reports called financial ___________________.

Question 36

A form of business entity owned by one person is called a(n)___________________.

Question 37

Ownership in a corporation is evidenced by shares of ___________________.

Question 38

Which of the following is NOT an area in which accountants usually practice?

A) Public Accounting
B) Industrial Accounting
C) Governmental Accounting
D) Managerial (Private)Accounting

Question 39

The owners of a corporation are called ___________________.

Question 40

Managerial accountants usually do which of the following?

A) audit financial statements
B) prepare tax returns and audit the returns
C) establish accounting policies
D) investigate companies for possible violations of law

Question 41

The form of a business organization that is not affected by the withdrawal or death of an owner and can continue forever is

A) the sole proprietorship.
B) the partnership.
C) the corporation.
D) the nonprofit organization.

Question 42

Which of the following is a true statement in regards to the International Accounting Standards Board?

A) The IASB deals with issues caused by the lack of uniform accounting principles existing in different countries
B) The IASB was created by the American Accounting Association
C) The IASB develops all accounting principles to be used in the United States
D) The IASB has the authority to audit financial statements of all US corporations

Question 43

Which of the following is NOT a type of information communicated by the financial statements?

A) the equity,or value,of the business
B) the amount spent on costs (expenses)of the business
C) the types of products and services the business provides
D) the amount of revenue earned by the business

Question 44

Owners are not personally responsible for the debts of the business if the form of business organization is

A) the sole proprietorship.
B) the partnership.
C) the corporation.
D) the nonprofit organization.

Question 45

The group of accounting educators who offer their opinions about proposed FASB statements,after research has been done to determine the possible effects on financial reporting and the economy,is

A) the FCC.
B) the AICPA.
C) the SEC.
D) the AAA.

Question 46

Which of the following is NOT part of the process of accounting for financial information?

A) recording
B) identifying
C) communicating
D) classifying

Question 47

All financial statements submitted to the SEC by publicly owned corporations must include an auditor's report prepared by

A) an internal auditor.
B) the firm's managerial accountant.
C) an independent certified public accountant.
D) anyone in the accounting department.

Question 48

A firm issues periodic reports called

A) financial statements.
B) summaries.
C) tax returns.
D) audits.

Question 49

The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as

A) privately owned corporations.
B) closely held corporations.
C) publicly owned corporations.
D) sole proprietorships.

Question 50

The area of accounting that involves the preparation of internal reports for a firm's executives and the analysis of the data in these reports to aid in decision making is known as

A) financial accounting.
B) managerial accounting.
C) auditing.
D) cost accounting.

Question 51

Tax planning includes

A) preparing tax returns.
B) auditing tax returns.
C) correcting tax returns.
D) suggesting actions to reduce tax liability.

Question 52

The financial affairs of a business and the financial affairs of the owners should be

A) combined in the firm's accounting records.
B) reported in different parts of the firm's accounting records.
C) combined only if the owner wants them to be.
D) kept totally separate.

Question 53

The government agency that has final authority over the financial reporting of publicly owned corporations is

A) the Securities and Exchange Commission.
B) the Federal Trade Commission.
C) the Internal Revenue Service.
D) the Financial Accounting Standards Board.

Question 54

Which of the following is NOT a type of information communicated by the financial statements?

A) whether or not the business is profitable
B) what types of assets business owns
C) how long the business has been in operation
D) how much the business owes others

Question 55

Managerial accounting is

A) public accounting.
B) government accounting.
C) private accounting.
D) tax accounting.

Question 56

Tax accounting involves tax compliance and

A) tax evaluation.
B) tax planning.
C) tax configuration.
D) tax obfuscation.

Question 57

Identify the form of business that is considered a separate legal entity.

A) a sole proprietorship
B) a corporation
C) a limited liability partnership
D) a partnership

Question 58

Identify the advantages of forming a business as an S Corporation.

A) owners avoid double taxation and owners have limited liability
B) treated as a separate legal entity and owners avoid double taxation
C) owners have limited liability and corporation's earnings are tax free
D) owner is personally responsible for debts of the business and earnings are reported directly on owner's personal tax return

Question 59

The Financial Accounting Standards Board is responsible for

A) auditing financial statements.
B) developing generally accepted accounting principles.
C) establishing accounting systems for businesses.
D) making recommendations to the Securities and Exchange Commission.

Question 60

Which of the following is NOT a service of public accounting firms?

A) auditing
B) tax accounting
C) management advisory services
D) investment services

Question 61

The Financial Accounting Standards Board has the authority to develop generally accepted accounting principles.Choose the option below that contains the steps used by the FASB in developing GAAP.

A) steps include: publishing a notice in the newspaper,seeking public opinion,and issuing a statement of principle.
B) steps include: issuing a discussion memorandum,filing a legal draft,and notifying the SEC.
C) steps include: filing a complaint with the SEC,issuing an internal report,and issuing a statement of principle.
D) steps include: issuing a discussion memorandum,issuing an exposure draft,and issuing a statement of principle.

Question 62

List three individuals or groups who use financial information to make decisions about a firm.For each listed,give an example of why they would need the information.

Question 63

Audited financial statements include an auditor's report.What does this auditor's report contain?

Question 64

An act passed in response to the wave of corporate accounting scandals is the

A) Saxon-Ordanly Act.
B) Sarbanes-Oxley Act.
C) Sardonic-Oxone Act.
D) Sorbine-Oxide Act.

Question 65

Define the following terms: entity,economic entity,and social entity.

Question 66

Identify the statement below that represents what GAAP stands for

A) Generally Accepted Accounting Principles.
B) Generally Accepted Auditing Practices.
C) General Accounting Actuary Principles.
D) Generally Approved Accounting Practices.

Question 67

The review of financial statements to assess their fairness and adherence to GAAP is

A) accounting.
B) preparation.
C) compliance.
D) auditing.

Question 68

List at least five activities performed by managerial accountants.

Question 69

A form of the partnerships business entity is

A) LLP.
B) LLC.
C) INP.
D) DBA.

Question 70

There are three general services public accountants offer.List and briefly describe each.

Question 71

What is the "language of business?" List three groups who use this financial information.

Question 72

The Sarbanes-Oxley Act includes rules on

A) auditor retention.
B) auditor reliability.
C) auditor rotation.
D) auditor reporting.

Question 73

How do sole proprietorships,partnerships,and corporations differ?

Question 74

List the "Big Four" public accounting firms in the United States.

Question 75

Owners and managers need financial information in order to

A) grant loans.
B) issue credit.
C) collect taxes.
D) make decisions.

Question 76

Cullen Company of country X and Shaw Industries of country Y have issued financial statements in compliance with the accounting principles of their respective countries.They would like to work together on a project and need to compare their current financial statements prior to beginning.However,the accounting principles of the two countries differ.What organization might they turn to regarding this issue? (Give both the full name of the organization and its acronym. )What is the function of this organization?

Question 77

Management advisory services are designed to help

A) government agencies.
B) clients.
C) employers.
D) creditors.

Question 78

An independent accountant who provides accounting services to the public for a fee is a

A) CIA.
B) CFE.
C) CMA.
D) CPA.

Question 79

You have just entered college and decide to pursue a career as an accountant.What are the three areas in which an accountant can practice?

Question 80

The following are all government agencies except

A) SEC.
B) AICPA.
C) IRS.
D) FBI.