Deck 1: Uses of Accounting Information and the Financial Statements

Question 1

The Sarbanes-Oxley Act orders the FASB to hold chief executives and CFOs responsible for the accuracy of their company's financial statements.

Answer 1

False

Question 2

Responsibility for ethical financial reporting rests solely with the accountant.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Criminal penalties cannot be imposed on those who prepare fraudulent financial statements.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

Management accounting focuses on external decision making.

Question 14

Financial accounting information is used primarily by management.

Question 15

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

Question 16

Earned income is a measure of profitability.

Question 17

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

Question 18

The terms bookkeeping and accounting are synonymous.

Question 19

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

Question 20

Accounting ratios are useful as management performance measures.

Question 21

Taxing authorities are considered accounting information users with an indirect financial interest.

Question 22

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

Question 23

Authorized shares of stock refer to the number of shares currently held by the stockholders.

Question 24

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

Question 25

Accountants consider money the common unit of measure for all business transactions.

Question 26

Partnerships in the United States generate more revenue than sole proprietorships and corporations put together.

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

For accounting purposes,a business and its owners are considered separate entities.

Question 35

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

Question 36

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

Question 37

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

Question 38

The Federal Reserve Board is an example of an economic planner.

Question 39

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

Question 40

For reporting purposes,the personal assets and debts of a business owner should be combined with the assets and debts of the business.

Question 41

The management of a corporation is responsible for electing the board of directors.

Question 42

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

Question 43

The board of directors carries out the day-to-day operations of a corporation.

Question 44

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

Question 45

Net income is another term for revenues.

Question 46

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

Question 47

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

Question 48

Revenues have the effect of increasing contributed capital.

Question 49

Cash is another term for retained earnings.

Question 50

Dividends are an example of an expense.

Question 51

Stockholders' equity equals contributed capital plus retained earnings.

Question 52

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

Question 53

Net assets equal assets plus liabilities.

Question 54

Par value is the minimum amount that can be reported as retained earnings.

Question 55

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

Question 56

Equipment is an asset that is considered nonmonetary in nature.

Question 57

Creditors' equities is another term for liabilities.

Question 58

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

Question 59

A partnership is dissolved when any partner leaves the business or dies.

Question 60

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

Question 61

The Internal Revenue Service is responsible for issuing accounting standards for state and local governments.

Question 62

The declaration of a dividend will reduce net income.

Question 63

The heading for a balance sheet might include the line "As of December 31,20xx."

Question 64

Both public accountants and management accountants are required to adhere to a code of professional conduct.

Question 65

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

Question 66

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

Question 67

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

Question 68

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

Question 69

A proper heading for the income statement could include "For the Year Ended December 31,20xx."

Question 70

The International Accounting Standards Board is the primary and most important determinant of generally accepted accounting principles.

Question 71

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

Question 72

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

Question 73

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

Question 74

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

Question 75

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

Question 76

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

Question 77

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

Question 78

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

Question 79

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

Question 80

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.