Deck 16: Accounting for Financial Success

Question 1

What is the process of reporting, summarizing, recording, collecting, classifying, and analyzing?

A) record keeping
B) bookkeeping
C) finance
D) accounting

Answer 1

D

Question 2

Which of the following calculations is a formal expression of the accounting equation?

A) assets - owners' equity = liabilities
B) assets = liabilities + owners' equity
C) assets + liabilities = retained earnings
D) assets + liabilities = owners' equity

Answer 2

B

Question 3

In accounting, every transaction must be recorded as two entries. This system is known as which of the following?

A) dual-notation bookkeeping
B) double-entry bookkeeping
C) double-decker bookkeeping
D) accounting-cycle bookkeeping

Answer 3

B

Question 4

Which of the following is a yearly document that describes a company's financial status and usually discusses a company's financial activities during the past year and its prospects for the future?

A) an earnings report
B) a trial balance
C) an annual report
D) a company summary

Question 5

In the accounting field, CMA stands for which of the following?

A) certified management accountant
B) centralized managerial accountant
C) certified motivational accountant
D) consolidated monetary auditor

Question 6

Financial accounting produces financial reports that are important to which of the following groups?

A) shareholders
B) managers
C) supervisors
D) employees

Question 7

To ensure accuracy and consistency in the way financial information is reported, accountants have historically followed which of the following rules?

A) generally accepted accounting principles
B) comparable accounting standards
C) accounting rules and principles
D) principled accounting procedures

Question 8

What is the first step in the accounting cycle?

A) Analyze the financial statements.
B) Prepare the financial statements.
C) Analyze the business transaction documents.
D) Prepare the trial balance.

Question 9

Which of the following deals with reporting to outsiders?

A) financial accounting
B) auditing
C) bookkeeping
D) internal accounting

Question 10

International Financial Reporting Standards will first be adopted by which of the following in Canada?

A) companies with government loans owing
B) publicly accountable organizations
C) for-profit companies only
D) all companies

Question 11

Which of the following is an example of an asset?

A) accounts payable
B) bank loan
C) inventory
D) owner's equity

Question 12

What are things of value owned by a company?

A) intangibles
B) assets
C) owners' equity
D) tangibles

Question 13

Managerial accounting provides which of the following financial information?

A) monthly sales records
B) income statements
C) reports for bankers and other investors
D) reports for shareholders

Question 14

Which of the following deals with the internal operation of the company?

A) managerial accounting
B) auditing accounting
C) bookkeeping
D) financial accounting

Question 15

Which of the following is an example of a liability that might be owed by a discount shoe store?

A) promotional signs
B) money owed to shoe distributors
C) money in the cash register
D) the reduced prices paid by customers

Question 16

Which of the following statements best describes the accounting profession?

A) Certified management accountants work for local, provincial, and national agencies.
B) Accountants do not need a degree to obtain their designation.
C) All accountants belong to the Chartered Professional Accountants of Canada (CPA).
D) Accountants need a master's degree to obtain their designation.

Question 17

What a company owes to its creditors is called debts. What is the term in accounting terminology?

A) liabilities
B) accounts payable
C) owners' equity
D) creditables

Question 18

What is another term for owners' equity?

A) assets
B) gross worth
C) net worth
D) liabilities

Question 19

Which of the following is the system used to record a company's financial transactions in a routine and clerical process?

A) auditing
B) bookkeeping
C) record keeping
D) accounting

Question 20

Which of the following is NOT one of the three primary financial statements included in the annual report?

A) balance sheet
B) cash flow statement
C) statement of changes in equity
D) income statement

Question 21

Which of the following is the company's ability to expense fixed assets over their useful life?

A) capital budgeting
B) depreciation
C) acceleration
D) assetization

Question 22

Which of the following is an example of a fixed asset for a manufacturer of road building equipment?

A) patents held on a new type of asphalt
B) shipping area for finished goods and receiving area for component parts
C) computer cartridges
D) cans of yellow paint for painting equipment

Question 23

Which of the following summarizes an organization's financial status at the end of an accounting period?

A) cash flow statement
B) balance sheet
C) trial balance
D) income statement

Question 24

What is the value paid for a company that exceeds the value of its net tangible assets?

A) market value
B) appreciation value
C) premium price
D) goodwill

Question 25

How soon are current assets, such as marketable securities and inventory, usually expected to be turned into cash?

A) within 1 month
B) within 1 year
C) within 18 months
D) within 5 years

Question 26

Fixed assets are property and buildings that a company expects to use for more than which period of time?

A) 1 month
B) 6 months
C) 1 year
D) 2 years

Question 27

Which of the following is NOT a financial statement but a system to prove the balance of the debits and credits and is a list of each account and its net balance?

A) practice balance
B) trial balance
C) trial ledger
D) T-account

Question 28

Which of the following are temporary investments of excess cash in bonds and shares that can readily be converted into cash?

A) marketable securities
B) accounts receivable
C) owners' net contribution margins
D) notes payable

Question 29

The Jolly Green Giant appears on all packages of frozen and canned vegetables and other dishes sold by the Green Giant Company. Because it does not have a physical existence, what is the Jolly Green Giant?

A) retained asset
B) tangible expense
C) intangible asset
D) hidden asset

Question 30

Which of the following is the best example of a current asset for a clinical psychologist?

A) the building in which his clinic is located
B) money he pays for rent and utilities
C) credit card charges by patients
D) his reputation as a compassionate man

Question 31

Not-for-profit organizations and many privately owned ones will often use which of the following terms instead of statement of financial position?

A) balance sheet
B) trial balance
C) income statement
D) net worth statement

Question 32

What are amounts owed to the company by customers who bought goods and services on credit?

A) notes payable
B) owners' equity
C) marketable receivables
D) accounts receivable

Question 33

Which of the following is the process of distributing the original cost of a long-term asset over the years of its useful life?

A) depreciation
B) accountable life
C) cost distribution
D) appreciation

Question 34

Allatoona Ceramics recently purchased a new kiln for $49,000. Allatoona Ceramics is allowed to charge a portion of the company's cost during its useful life against the profits it generates. What is this practice called?

A) assetization
B) acceleration
C) deceleration
D) depreciation

Question 35

Trademarks, franchises, patents, and copyrights are carried on the company's books as which of the following?

A) intangible assets
B) owners' equity
C) tangible assets
D) long-term assets

Question 36

Current assets are listed in a particular order. What is the listing order based on?

A) value
B) net worth
C) liquidity
D) life span

Question 37

Which of the following is an example of an intangible asset for a manufacturer of padlocks?

A) patent on a titanium lock mechanism
B) money owed to the company by a superstore chain
C) machine for forming the locks out of sheet metal
D) warehouse for storing locks

Question 38

Which of the following is an account that is often used to analyze financial transactions and is named after a letter?

A) C-account
B) D-account
C) P-account
D) T-account

Question 39

Which of the following are debts that are to be paid within 12 months?

A) current assets
B) fixed assets
C) current liabilities
D) fixed liabilities

Question 40

For which of the following assets would a wholesale company use depreciation?

A) its patented computer tracking equipment
B) inventory of unsold merchandise
C) gasoline used to power its delivery trucks
D) its warehouses

Question 41

What is a short-term loan from a bank, supplier, or others that must be repaid within a year?

A) account payable
B) note receivable
C) note payable
D) account receivable

Question 42

Which of the following is NOT a current liability?

A) income taxes payable
B) accrued expenses
C) note payable
D) account receivable

Question 43

What is the difference between net sales and cost of goods sold?

A) net income
B) general income
C) net revenues
D) gross profit

Question 44

Net sales is best described by which of the following?

A) total sales for the accounting period
B) profit after cost of goods sold is deducted
C) amount after deducting sales discount and returns and allowances from gross sales
D) profit after all expenses are paid

Question 45

What is another term for owner's equity?

A) earnings statement
B) net worth
C) retained earnings
D) share value

Question 46

In manufacturing, how are all costs directly related to production-including raw materials, labour, and factory overhead-classified?

A) cost of goods sold
B) intangible profits
C) operating expenses
D) inventory expenses

Question 47

Dayton Industries manufactures the motors used in heating and air conditioning systems. It had sales of $300,000 during the last quarter. Its gross profit was $120,000. On an income statement, an accountant would classify the remaining $180,000 as which of the following?

A) cost of production
B) operating expenses
C) cost of goods sold
D) production income

Question 48

Which of the following is an example of a long-term liability?

A) account payable
B) bonds
C) note payable
D) accrued expenses

Question 49

The total expense of buying or producing the company's goods or services is known as which of the following?

A) inventory allotment
B) materials expense
C) cost of goods sold
D) manufacturing costs

Question 50

Which of the following terms equals the total profits of a company minus all dividends (distributions of profits) to shareholders?

A) net earnings
B) net worth
C) retained earnings
D) owners' equity

Question 51

Which of the following is a summary of what a company has earned and spent over a given period?

A) balance sheet
B) cash flow statement
C) income statement
D) trial balance

Question 52

Humphrey Mattress Company sold $130,000 worth of merchandise in May. The manufacturer gave no discounts and had no returns. Which of the following statements best describes the information seen on the company's income statement?

A) liabilities equal assets
B) gross sales equal net sales
C) cost of goods sold exceeds gross sales
D) gross sales exceeds net sales

Question 53

Which of the following is an example of a cost of goods sold for a manufacturer of electric fans?

A) overtime hours needed to fill a large summer order
B) office phone bill
C) sales commissions
D) factory utilities

Question 54

Which of the following are the two types of expenses recorded on the income statement?

A) cost of goods sold and production costs
B) sales expenses and administrative expenses`
C) operating expenses and administrative expenses
D) cost of goods sold and operating expenses

Question 55

What is another term for an operating statement or an earnings statement?

A) cash flow statement
B) income statement
C) balance sheet
D) transaction ledger

Question 56

Bert Yelverton has a 20-year mortgage on the building where his office is located. The mortgage is an example of which of the following?

A) long-term liability
B) current asset
C) owners' equity
D) current liability

Question 57

Wehrmann-Longo sells landscape rocks to retailers. It recently purchased a trainload of lava rocks from a mine in Hawaii. Until Wehrmann-Longo pays the bill, the purchase will be carried on the Hawaiian company's books as which of the following?

A) account payable
B) account receivable
C) intangible asset
D) current asset

Question 58

Gross sales for Alfredo Milling Company was $100,000 for the month of May. Sales discounts amounted to $3,000. There were no returns. The difference, $97,000, represents which of the following for Alfredo Milling Company?

A) cost of goods sold
B) gross revenues
C) gross profit
D) net sales

Question 59

Watts Regulator makes hydroponic pressure valves used in water pumps and water heaters. Watts had $100,000 in net sales for the month. Cost of goods sold was $42,000. On an income statement, how would the remaining $58,000 be classified?

A) gross profit
B) net revenues
C) general income
D) gross revenues

Question 60

What is the dollar amount of sales plus any other income received from sources such as interest and dividends?

A) revenues
B) capital
C) intangible assets
D) equities

Question 61

Which of the following is the financial statement used to assess the sources and uses of cash during the year?

A) trial balance
B) balance sheet
C) income statement
D) statement of cash flows

Question 62

Which of the following is used by managers to interpret the numbers in financial statements?

A) depreciation ratios
B) asset analysis
C) operating ratios
D) ratio analysis

Question 63

What is the term for the expenses of running a business that are not directly related to producing or buying its products?

A) selling expenses
B) office expenses
C) general and administrative expenses
D) operating expenses

Question 64

What do liquidity ratios measure?

A) long-term financial stability
B) earnings per share
C) annual sales and profits
D) short-term financial stability

Question 65

What is the ratio of total current assets to current liabilities?

A) activity ratio
B) profitability ratio
C) current ratio
D) net margin ratio

Question 66

Which of the following involves calculating and interpreting financial ratios taken from the company's financial statements in order to assess its condition and performance?

A) organizational performance appraisal
B) ratio analysis
C) performance analysis
D) financial reporting

Question 67

On an income statement, what are operating expenses that cannot be linked to cost of goods sold or to sales?

A) incidental expenses
B) functional expenses
C) miscellaneous expenses
D) general and administrative expenses

Question 68

Which of the following expenses are related to marketing and distributing of a company's products?

A) administrative expenses
B) selling expenses
C) distribution costs
D) functional costs

Question 69

Which of the following is NOT one of the three groups that the statement of cash flows divides the company's cash flow into?

A) cash flow from investment activities
B) cash flow from exporting activities
C) cash flow from financing activities
D) cash flow from operating activities

Question 70

Myriad Canning Company has current assets of $8,000 and current liabilities of $2,000. What is its current ratio?

A) 2.5
B) 4
C) 8
D) 25

Question 71

Which of the following is NOT one of the three main measures of liquidity?

A) activity ratio
B) acid-test ratio
C) net working capital
D) current ratio

Question 72

On an income statement, what are expenses such as professional salaries, office salaries, office supplies, rent, and insurance?

A) miscellaneous expenses
B) managerial expenses
C) functional expenses
D) general and administrative expenses

Question 73

Which of the following ratios is a measure of the company's ability to pay its current liabilities once inventory is subtracted from current assets?

A) acid-test ratio
B) net margin ratio
C) profitability ratio
D) inventory ratio

Question 74

On a statement of cash flows for a manufacturer of digital thermometers, the cash flows from operating activities would include which of the following?

A) the sale of land adjacent to the manufacturer's administrative office building
B) repayment of long-term loan by a wholesaler of weather-related items
C) increases in the manufacturer's inventory
D) the money borrowed from the bank to start the company

Question 75

Which of the following is a summary of the money flowing into and out of a company?

A) short-term budget
B) statement of cash flows
C) balance sheet
D) income statement

Question 76

After all expenses have been subtracted from revenues on an income statement, if the final figure is negative, it is known as which of the following?

A) owners' negative equity
B) net loss
C) negative liability
D) net liability

Question 77

What are the two main types of operating expenses?

A) production and general and administrative
B) production and office
C) selling and general and administrative
D) office and selling

Question 78

What are ratios of special interest to the company's creditors that measure the company's ability to pay short-term debts as they come due?

A) liquidity ratios
B) earnings ratios
C) profitability ratios
D) current ratios

Question 79

On a statement of cash flows for a manufacturer of digital thermometers, the cash flows from investment activities section would include which of the following?

A) the sale of land adjacent to the manufacturer's administrative office building
B) purchase of a new $25,000 copying machine
C) repayment of long-term loan by a wholesaler of weather-related items
D) the money borrowed from the bank to start the company

Question 80

After all expenses have been subtracted from revenues on an income statement, if the final figure is positive, it is known as which of the following?

A) owners' equity
B) net revenue
C) net profit
D) gross profit