Deck 1: Uses of Accounting Information and the Financial Statements

Question 1

The unintentional preparation of misleading financial statements is referred to as fraudulent financial reporting.

Answer 1

False

Question 2

Buying and selling goods and services are examples of financing activities.

Answer 2

False

Question 3

Financial accounting information is used primarily by management.

Answer 3

False

Question 4

Paying taxes to the government is an example of an operating activity.

Question 5

Earned income is a measure of profitability.

Question 6

Obtaining funds from a bank is an example of a financing activity.

Question 7

Profitability means having enough funds on hand to pay debts when they fall due.

Question 8

Fraudulent financial reporting can result from the misapplication of accounting principles.

Question 9

The modern definition of accounting focuses on how to do accounting rather than the role of accounting in making economic decisions.

Question 10

The processing stage of accounting is accomplished by the recording of data.

Question 11

Depending on the circumstances,criminal penalties could be imposed on those who prepare fraudulent financial statements.

Question 12

A company's management information system is a subsystem of its accounting information system.

Question 13

Two major goals of business are to achieve profitability and to achieve liquidity.

Question 14

A major function of management is to provide the accountant with relevant and useful information.

Question 15

Management accounting focuses on internal decision making.

Question 16

The terms bookkeeping and accounting are not synonymous.

Question 17

The Sarbanes-Oxley Act orders the Financial Accounting Standards Board (FASB)to hold Chief Executive Officers (CEOs)and Chief Financial Officers (CFOs)responsible for the accuracy of their company's financial statements.

Question 18

The purchase of equipment is an example of a financing activity.

Question 19

Responsibility for ethical financial reporting rests solely with management.

Question 20

Accounting ratios are never used as management performance measures.

Question 21

In general,any partner can obligate the partnership to another party.

Question 22

Sole proprietorships in the United States generate more revenue than partnerships and corporations put together.

Question 23

Creditors are those who lend money to others or deliver goods and services before being paid.

Question 24

Partnerships represent the largest number of businesses in the United States.

Question 25

Taxing authorities are considered accounting information users with a direct financial interest.

Question 26

For accounting purposes,a business and its owners are considered the same entity.

Question 27

Payment to a creditor is an example of a nonexchange business transaction.

Question 28

The Securities and Exchange Commission (SEC)is an accounting information user with a direct financial interest.

Question 29

Accountants consider the euro to be the common unit of measure for all business transactions.

Question 30

The primary external users of accounting information are investors and management.

Question 31

For reporting purposes,the personal assets and debts of a business owner should not be combined with the assets and debts of the business.

Question 32

A partnership is not dissolved when any partner leaves the business or dies.

Question 33

The liability of corporate stockholders is limited to the amount of their investment.

Question 34

The articles of incorporation may be found in the corporate charter.

Question 35

Knowledge of the exchange rate is necessary to apply the money measure concept in case of international transactions.

Question 36

The audit committee appoints the board of directors,which in turn performs an independent audit of the company's records.

Question 37

Exchange rates for currency change daily according to the supply and demand for each currency.

Question 38

A corporation is an economic unit that is legally separate from its owners.

Question 39

The Federal Reserve Board is an example of a labor union.

Question 40

Regulatory agencies are considered information users with an indirect financial interest.

Question 41

Par value is the minimum amount that can be reported as contributed capital.

Question 42

The board of directors decides on major business policies of a corporation.

Question 43

Net income is another term for revenues.

Question 44

The economic resources to which the owners have claim are represented by stockholders' equity.

Question 45

The retained earnings figure is typically divided into par value and additional paid-in capital.

Question 46

If a corporation has suffered only net losses since its inception,the Retained Earnings account will have a positive balance.

Question 47

One way of stating the accounting equation is: Assets + Stockholders' Equity = Liabilities.

Question 48

The statement of retained earnings discloses the dividends declared during the period.

Question 49

The management of a corporation is appointed by the board of directors.

Question 50

Authorized shares of stock refers to the number of shares authorized in the articles of incorporation..

Question 51

Corporate governance is the oversight of a company's management performance and ethics by its board of directors.

Question 52

Contributed capital appears in the stockholders' equity section of a corporate balance sheet.

Question 53

Stockholders' equity equals contributed capital minus retained earnings.

Question 54

Land is an asset that is considered nonmonetary in nature.

Question 55

Stockholder's equity is another term for retained earnings.

Question 56

The number of authorized shares of stock may be less than the number of outstanding shares.

Question 57

An increase in revenue will result in an increase in stockholders' equity.

Question 58

Net assets equals assets plus liabilities.

Question 59

Revenues have the effect of increasing retained earnings.

Question 60

Financial position may be assessed by referring to a balance sheet.

Question 61

Objectivity means carrying out one's professional responsibilities with competence and diligence.

Question 62

The purchase of equipment for cash would be disclosed on the statement of cash flows.

Question 63

The heading for a balance sheet might include the line "For the Year Ended December 31,2013."

Question 64

The accounting fees earned by an accounting firm would appear on its balance sheet.

Question 65

All public accountants but not management accountants are required to adhere to a code of professional conduct.

Question 66

The Public Company Accounting Oversight Board (PCAOB)was created to determine the standards that auditors must follow.

Question 67

The income statement is also known as the statement of financial position.

Question 68

A proper heading for the income statement could include "As of December 31,2013."

Question 69

Independence is the avoidance of all relationships that impair or appear to impair the objectivity of the accountant.

Question 70

The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.

Question 71

Objectivity means carrying out one's professional responsibilities honestly and impartially.

Question 72

The Internal Revenue Service is an agency of the federal government that has the legal power to set and enforce accounting practices for companies.

Question 73

The title "wages payable" would appear on the income statement.

Question 74

Dividends are an example of a revenue.

Question 75

The title "land" will appear as an expense on the income statement.

Question 76

Companies whose securities are sold to the general public must adhere to standards established by the Securities and Exchange Commission (SEC).

Question 77

The declaration of a dividend will increase net income.

Question 78

The Financial Accounting Standards Board (FASB)is the primary and most important determinant of generally accepted accounting principles.

Question 79

The income statement discloses significant events related to the operating,investing,and financing activities of a business.

Question 80

Generally accepted accounting principles (GAAP)encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.