Deck 1: Accounting: the Language of Business

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

The death or withdrawal of one partner ends the partnership.

Question 5

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

Question 6

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 7

The owners and managers of a business are the only users of the Financial Information.

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

Anyone can invest in a closely held corporation.

Question 18

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 19

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

Question 20

Tax planning is any activity associated with the preparation of tax returns and the audit of those returns.

Question 21

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 22

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

Question 23

The owners of a corporation are called ____________________.

Question 24

Accounting is often referred to as the language of ____________________.

Question 25

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

Question 26

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 27

An example of an economic entity is

A) a town.
B) a business.
C) a nonprofit hospital.
D) a church.

Question 28

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

Question 29

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

Question 30

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 31

Nonprofit organizations, such as cities, public schools, and public hospitals, are referred to as ____________________ entities.

Question 32

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

Question 33

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

Question 34

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 35

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

Question 36

Ownership in a corporation is evidenced by shares of ____________________.

Question 37

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 38

A business partnership can have only two partners.

Question 39

A partnership has ____________________ or more owners.

Question 40

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

Question 41

Owners and managers need financial information in order to

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

Question 42

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 43

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

A) Recording
B) Identifying
C) Communicating
D) Classifying

Question 44

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 45

A form of the partnerships business entity is

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

Question 46

Tax planning includes

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

Question 47

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 48

A firm issues periodic reports called

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

Question 49

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 50

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 51

Tax accounting involves tax compliance and

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

Question 52

Managerial accounting is

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

Question 53

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 54

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 55

The following are all government agencies except

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

Question 56

The Sarbanes-Oxley Act includes rules on

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

Question 57

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 58

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 59

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 60

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 61

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

Question 62

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 63

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

Question 64

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

Question 65

List at least three of the provisions of the Sarbanes-Oxley Act.

Question 66

The FASB develops Statements of Financial Accounting Standards in the following order

A) issues an exposure draft, obtains responses to the exposure draft, issues a statement of principle, issues a discussion memorandum, obtains responses to the discussion memorandum
B) issues a discussion memorandum, obtains responses to the discussion memorandum, issues an exposure draft, obtains responses to the exposure draft, issues a statement of principle
C) issues a discussion memorandum, obtains responses to the discussion memorandum, issues a statement of principle, issues an exposure draft, obtains responses to the exposure draft
D) issues a statement of principle, issues a discussion memorandum, obtains responses to the discussion memorandum, issues an exposure draft, obtains responses to the exposure draft

Question 67

Discuss the differences among: entity, economic entity, and social entity.

Question 68

How do sole proprietorships, partnerships, and corporations differ?

Question 69

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 70

List at least five activities performed by managerial accountants.

Question 71

What determines the independence of Certified Public Accountants (CPAs)?

Question 72

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

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

Question 73

Explain the process the Financial Accounting Standards Board (FASB) employs to develop and issue Statements of Financial Accounting Standards.

Question 74

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 75

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

Question 76

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

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

Question 77

Management advisory services are designed to help

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