Deck 1: Accounting: Information for Decision Making

Question 1

Financial accounting standards issued by the FASB are considered generally accepted accounting principles.

Answer 1

True

Question 2

A statement of cash flows depicts the way profits have changed during a designated period.

Answer 2

False

Question 3

The American Institute of Certified Public Accountants has the legal authority over publicly held corporations to enforce compliance with generally accepted accounting principles.

Answer 3

False

Question 4

Today,the most authoritative source of generally accepted accounting principles is the American Accounting Association.

Question 5

Management accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers outside the business organization.

Question 6

Investors are individuals and other enterprises that have provided equity to the reporting enterprise.

Question 7

The IRS tax return is one of the primary financial statements.

Question 8

External users of accounting information have a financial interest in an entity but are not involved with the day-to-day operations of the enterprise.

Question 9

Return on investment is the same as return of investment.

Question 10

The Public Company Accounting Oversight Board is responsible for creating and promoting International Financial Reporting Standards.

Question 11

The content of management accounting reports needs to be presented in conformity with generally accepted accounting principles.

Question 12

The Securities and Exchange Commission is instrumental in the development of financial accounting standards.

Question 13

An accounting practice can become a "generally accepted accounting principle" through widespread use,even if the practice is not mentioned in the official pronouncements of the accounting standard-setting organizations.

Question 14

Management accounting information is oriented toward the future while financial accounting information is historical in nature.

Question 15

Managerial accounting information is designed primarily to assist investors and creditors in deciding how to allocate scarce resources.

Question 16

The annual financial statements of large corporations such as Microsoft or PepsiCo need not be audited by independent certified public accountants,since these firms maintain large accounting departments as part of their organizations.

Question 17

The tailoring of an accounting report to meet the needs of a specific decision maker is more characteristic of financial accounting reports than of management accounting reports.

Question 18

One purpose of generally accepted accounting principles is to make accounting information prepared by different companies more comparable.

Question 19

All internal control systems need to be monitored.

Question 20

The statement of financial position and the income statement are one and the same.

Question 21

The Code of Ethics of the AICPA calls for a commitment to ethical behavior but not at the sacrifice of personal advantage.

Question 22

The objectives of an accounting system include all of the following,except:

A)Interpret and record the effects of business transactions.
B)Classify the effects of transactions to facilitate the preparation of reports.
C)Summarize and communicate information to decision makers.
D)Dictate the specific types of business transactions the enterprise may pursue.

Question 23

A strong internal control structure:

A)Contributes to the accuracy and verifiability of the accounting records.
B)Will prevent a business from operating at a loss.
C)Ensures a business will remain solvent.
D)Will prevent fraud,theft,and embezzlement.

Question 24

Generally accepted accounting principles were established by the American Accounting Association in 1934 and are updated annually by Congress.

Question 25

The accounting systems of most business organizations:

A)Are tailored to meet the organization's needs for accounting information and the resources available for operating the system.
B)Are similar in design to the journals,ledgers,and worksheets illustrated in this text.
C)Utilize data bases,rather than ledger accounts.
D)Are designed by the CPA firm that performs the annual financial audit.

Question 26

The basic purpose of bookkeeping is to:

A)Provide financial information about an economic entity.
B)Develop the types of information best-suited to specific managerial decisions.
C)Record the financial transactions of an economic entity.
D)Determine the taxable income of individuals and business entities.

Question 27

The Code of Ethics of the AICPA calls for a member in public practice to be independent in fact and appearance when providing auditing services.

Question 28

The best definition of an accounting system is:

A)Journals,ledgers,and worksheets.
B)Manual or computer-based records used in developing information about an entity for use by managers and also persons outside the organization.
C)The personnel,procedures,technology,and records used by an entity to develop accounting information and communicate this information to decision makers.
D)The concepts,principles,and standards specifying the information which should be included in financial statements,and how that information should be presented.

Question 29

Which of the following events is not a transaction that would be recorded in a company's accounting records?

A)The purchase of equipment for cash.
B)The purchase of equipment on account.
C)The investment of additional cash in the business by the owner.
D)The death of a key executive.

Question 30

Career opportunities in accounting exist in public accounting,management accounting,governmental accounting,and accounting education.

Question 31

Financial accounting information is:

A)Designed to assist investors and creditors.
B)Submitted to the IRS in lieu of a tax form.
C)Called "special-purpose" accounting information.
D)Not applicable to individuals.

Question 32

Information is cost effective when:

A)The information aids management in controlling costs.
B)The information is based upon historical costs,rather than upon estimated market values.
C)The value of the information exceeds the cost of producing it.
D)The information is generated by a computer based accounting system.

Question 33

Which of the following is not characteristic of financial accounting?

A)Information used in financial statements is prepared in conformity with generally accepted accounting principles.
B)The information is confidential and is intended for use only by company management.
C)The information is used in a wide variety of business decisions.
D)The information is developed primarily by "private accountants" that is,accountants employed by business organizations.

Question 34

Which of the following is not a basic function of an accounting system?

A)To interpret and record the effects of business transactions.
B)To classify the effects of similar transactions in a manner that permits determination of various totals and subtotals useful to management.
C)To ensure that a business organization will be managed profitably.
D)To summarize and communicate information to decision makers.

Question 35

Public accounting is the segment of the profession where professionals offer audit,tax,and consulting services to clients.

Question 36

Which of the following does not describe accounting?

A)It is commonly referred to as the language of business.
B)It is an end rather than a means to an end.
C)It is useful for decision-making.
D)It is used by businesses,governments,non-profit organizations,and individuals.

Question 37

The CPA examination is administered by the General Accounting Office of the U.S.Government.

Question 38

The Sarbanes-Oxley Act places responsibility on CEOs and CFOs of companies to certify the fairness of a company's financial statements.The Act also created the Public Company Accounting Oversight Board,which oversees the public accounting profession.

Question 39

The New York Stock Exchange requires all listed companies to:

A)Register with the PCAOB (Public Company Accounting Oversight Board).
B)Send financial statements directly to investors,creditors,and other users of financial information.
C)Maintain an internal audit function.
D)Use IFRS (International Financial Reporting Standards)for financial statement reporting purposes.

Question 40

The field of accounting may best be described as:

A)Recording the financial transactions of an economic entity.
B)Developing information in conformity with generally accepted accounting principles.
C)The art of interpreting,measuring,and describing economic activity.
D)Developing the information required for the preparation of income tax returns.

Question 41

Suppose a number of your friends have organized a company to develop and sell a new software product.They have asked you to loan them $8,000 to help get the company started,and they have promised to repay your $8,000 plus 10% interest in one year.Of the following,which amount may be described as the return on your investment?

A)$8,000
B)$800
C)$8,800
D)$7,200

Question 42

Financial statements are designed primarily to:

A)Provide managers with detailed information tailored to the managers' specific information needs.
B)Provide people outside the business organization with information about the company's financial position and operating results.
C)Report to the Internal Revenue Service the company's taxable income.
D)Indicate to investors in a particular company the current market values of their investments.

Question 43

Investors and creditors are interested in the probability that their original investment or loan will eventually be returned,and that they will receive a reasonable return while their funds are invested or borrowed.These expectations are collectively referred to as:

A)Expected profitability.
B)The objectives of financial reporting.
C)Cash flow prospects.
D)Financial position.

Question 44

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time?

A)The balance sheet.
B)The income statement.
C)The statement of cash flows.
D)Consolidated statement of stockholders' equity.

Question 45

Which of the following are not considered "external" users of financial statements?

A)Owners.
B)Creditors.
C)Labor unions.
D)Managers.

Question 46

Which of the following is generally not considered an external user of accounting information?

A)Stockholders of a corporation.
B)Bank lending officers.
C)Financial analysts.
D)Factory managers.

Question 47

Which of the following decision makers is least likely to be among the users of management accounting reports developed by Sears Roebuck and Co.?

A)The chief executive officer of Sears.
B)The manager of the Automotive Department in a Sears' store.
C)The manager of a mutual fund considering investing in Sears' common stock.
D)Internal auditors within the Sears organization.

Question 48

The general purpose financial statements prepared annually by a corporation would not include the:

A)Balance sheet.
B)Income tax return.
C)Income statement.
D)Statement of cash flows.

Question 49

Which financial statement is prepared as of a specific date?

A)The balance sheet
B)The income statement
C)The statement of cash flows
D)The balance sheet,income statement,and statement of cash flows are all for a period of time rather than at a specific date.

Question 50

The financial statements of a business entity:

A)Include the balance sheet,income statement,and income tax return.
B)Provide information about the cash flow prospects of the company.
C)Are the first step in the accounting process.
D)Are prepared for a fee by the Financial Accounting Standards Board.

Question 51

Financial statements are prepared:

A)Only for publicly owned business organizations.
B)For corporations,but not for sole proprietorships or partnerships.
C)Primarily for the benefit of persons outside of the business organization.
D)In either monetary or nonmonetary terms,depending upon the need of the decision maker.

Question 52

Financial statements may be prepared for which time period?

A)One year.
B)Less than one year.
C)More than one year.
D)Any time period.

Question 53

A complete set of financial statements for Citywide Company,at December 31,2018,would include each of the following,except:

A)Balance sheet as of December 31,2018.
B)Income statement for the year ended December 31,2018.
C)Statement of projected cash flows for 2019.
D)Notes containing additional information that is useful in interpreting the financial statements.

Question 54

Investors may be described as:

A)Individuals and enterprises that have provided credit to a reporting entity.
B)Individuals and enterprises that have ownership interest in a reporting entity.
C)Anyone with an interest in the results of the operations of the reporting entity.
D)Those whose primary economic activity consists of buying and selling stocks and bonds.

Question 55

Which of the following is considered a return "on" investment?

A)Dividends.
B)Repayment of a loan.
C)Purchase of an asset.
D)Securing a loan.

Question 56

The principal difference between management accounting and financial accounting is that financial accounting information is:

A)Prepared by managers.
B)Intended primarily for use by decision makers outside the business organization.
C)Prepared in accordance with a set of accounting principles developed by the Institute of Certified Management Accountants.
D)Oriented toward measuring solvency rather than profitability.

Question 57

Which of the following is generally not considered one of the general purpose financial statements issued by a corporation?

A)Income statement forecast for the coming year.
B)Balance sheet.
C)Statement of financial position.
D)Statement of cash flows.

Question 58

In comparison with a financial statement prepared in conformity with generally accepted accounting principles,a management accounting report is more likely to:

A)Be used by decision makers outside of the business organization.
B)Focus upon the operation results of the most recently completed accounting period.
C)View the entire organization as the reporting entity.
D)Be tailored to the specific needs of an individual decision maker.

Question 59

Although accounting information is used by a wide variety of external parties,financial reporting is primarily directed toward the informational needs of:

A)Investors and creditors.
B)Government agencies such as the Internal Revenue Service.
C)Customers.
D)Trade associations and labor unions.

Question 60

Of the following objectives of financial reporting,which is the most specific?

A)Provide information useful in assessing amount,timing,and uncertainty of future cash flows.
B)Provide information useful in making investment and credit decisions.
C)Provide information about economic resources,claims to resources,and changes in resources and claims.
D)Provide information useful to help the enterprise achieve its goals,objectives,and mission.

Question 61

Audits of financial statements are performed by:

A)The controller of the reporting company.
B)The Financial Accounting Standards Board (FASB).
C)The management of the reporting company.
D)Independent certified public accountants (CPAs).

Question 62

Internal users of financial accounting information include all of the following except:

A)Investors.
B)Managers.
C)Chief Financial Officer.
D)Chief Executive Officer.

Question 63

The basic purpose of generally accepted accounting principles is to:

A)Minimize the possibility of a business becoming insolvent.
B)Provide a framework for financial reporting that is understood by both the preparers and the users of financial statements.
C)Ensure that financial statements include the type of information that is best suited to every type of business decision.
D)Eliminate the need for professional judgment in preparing financial statements.

Question 64

All of the following are characteristics of management accounting,except:

A)Reports are used primarily by insiders rather than by persons outside of the business entity.
B)Its purpose is to assist managers in planning and controlling business operations.
C)Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.
D)Information may be tailored to assist in specific managerial decisions.

Question 65

Which of the following is not an important factor in ensuring the integrity of accounting information?

A)Institutional factors,such as standards for preparing information.
B)Professional organizations,such as the American Institute of CPAs.
C)Competence,judgment,and ethical behavior of individual accountants.
D)The cost of preparing the financial information.

Question 66

Establishing international accounting standards is the responsibility of:

A)AICPA.
B)IASB.
C)SEC.
D)AAA.

Question 67

It is the function of management accounting to perform the following activities,except:

A)Create financial forecasts.
B)Perform cost accounting.
C)Complete internal audits.
D)Audit financial statements.

Question 68

Overseeing a company's affairs to ensure that the company is managed with the best interest of shareholders in mind is called:

A)Internal control.
B)Financial integrity.
C)Corporate governance.
D)The audit function.

Question 69

Which of the following is a characteristic of financial accounting information?

A)Its preparation requires judgment.
B)It is more about the future than it is about the past.
C)None of it is based on estimates,assumptions,and judgments.
D)Notes and explanations from management are not included.

Question 70

Characteristics of internal accounting information include all of the following except:

A)It is audited by a CPA.
B)It must be timely.
C)It is generally oriented toward the future.
D)It measures efficiency and effectiveness.

Question 71

Which of the following is not a user of internal accounting information?

A)Store manager
B)Chief executive officer
C)Creditor
D)Chief financial officer

Question 72

Which of the following statements is considered a "snapshot" of the business in financial or dollar terms?

A)Statement of financial position.
B)Statement of cash flows.
C)Income statement.
D)The federal income tax return.

Question 73

Financial accounting information is characterized by all of the following except:

A)It is historical in nature.
B)It results from inexact and approximate measures.
C)It is factual,so it does not require judgment to prepare.
D)It is enhanced by management's explanation.

Question 74

Generally accepted accounting principles:

A)Are based on official decrees only.
B)Are based on tradition only.
C)Are based on an accountant's experience only.
D)May change over time.

Question 75

The basic purpose of an audit is to:

A)Assure outsiders that financial statements are prepared in conformity with GAAP.
B)Provide as much useful information to decision makers as possible,regardless of cost.
C)Record changes in the financial position of an organization by applying the concepts of double entry accounting.
D)Meet an organization's need for accounting information as efficiently as possible.

Question 76

The auditor's report on the published financial statements of a large corporation should be viewed as:

A)The opinion of independent experts as to the overall fairness of the statements.
B)The opinion of the corporation's chief accountant as to the overall fairness of the statements.
C)A guarantee by a firm of certified public accountants that the statements are accurate.
D)A guarantee by the Financial Statements Insurance Board that the statements do not overstate assets or net income.

Question 77

The Sarbanes-Oxley Act of 2002 created:

A)The Security and Exchange Commission.
B)The Financial Accounting Standards Board.
C)The Public Company Accounting Oversight Board.
D)The Income Tax Return Overview Board.

Question 78

The set of standards,assumptions,and concepts that form the "ground rules" for financial reporting in the United States is termed:

A)The conceptual framework.
B)Generally accepted accounting principles.
C)Statements of Financial Accounting Concepts.
D)American standards for certified public accountants.

Question 79

Objectives of financial reporting to external investors and creditors include preparing information about all of the following except:

A)Information used to determine which products to produce.
B)Information about economic resources,claims to those resources,and changes in both resources and claims.
C)Information that is useful in assessing the amount,timing,and uncertainty of future cash flows.
D)Information that is useful in making investment and credit decisions.

Question 80

Generally accepted accounting principles are intended to assist accountants in preparing financial statements that:

A)Are relevant,verifiable,comparable,and understandable.
B)Show the business to be both solvent and profitable.
C)Comply with all income tax rules and regulations.
D)Are ideally suited to the specific needs of each user of the financial statements.