Question 1

Information from the cash budget, the capital expenditure budget, and the budgeted income statement are combined to form the budgeted balance sheet.

Accepted Answer

This is true as the information from these budgets are required to estimate the assets, liabilities, and equity of the company at the end of the budget period. The budgeted balance sheet provides a snapshot of the financial position of the business at a specific point in time, based on the company's projected financial performance for the period.

Question 2

Budgeting encourages communication and coordination among managers and employees in various departments within an organization.

Accepted Answer

Budgeting involves setting specific financial goals and objectives for an organization, which requires input and collaboration from different departments and levels of management. This promotes communication and coordination as managers and employees work together to create a budget that aligns with the overall strategic plan of the organization.

Question 3

Operating budget documents include the cash budget and the capital expenditure budget.

Accepted Answer

Operating budget documents typically include the sales budget, production budget, and operating expenses budget, but not the cash budget or capital expenditure budget, which are part of the financial budget.

Question 4

Laura and Abby are evaluating three telecommunication companies to determine the best company to invest in. Horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help determine the increase in their profits.

Accepted Answer

This statement is true. Horizontal analysis involves comparing financial statements of a company over multiple time periods to identify trends and changes in certain financial items, such as profits. This can help in evaluating the financial performance of different companies and making investment decisions.

Question 5

Financial budgets identify projected sales and production goals and the various costs a firm will incur to meet these goals.

Accepted Answer

The answer of Financial budgets identify projected sales and production...

Question 6

The Securities and Exchange Commission (SEC) does not require publicly traded corporations to provide comparative financial statements.

Accepted Answer

The Securities and Exchange Commission (SEC) does require publicly traded corporations to provide comparative financial statements in their annual reports. This can include balance sheets, income statements, and cash flow statements for the current and previous reporting periods.

Question 7

A bottom­up approach to budgeting allows lower level managers to participate in the development of budgets.

Accepted Answer

A bottom-up approach to budgeting involves involving lower level managers in the process of developing a budget, which allows for greater participation and input from those who have more knowledge and understanding of the day-to-day operations of the organization. This is in contrast to a top-down approach, where the budget is developed by higher-level executives without as much input from lower-level employees.

Question 8

Managerial accounting involves preparing financial statements for use by external stakeholders such as owners, creditors, and suppliers.

Accepted Answer

Managerial accounting is focused on providing financial information and reports for internal use by management to make decisions about the operations of a company. It is not primarily geared towards external stakeholders.

Question 9

In the top­down approach to budgeting, companies allow middle and supervisory managers to participate actively in the creation of a budget.

Accepted Answer

In the top-down approach to budgeting, upper management creates the budget and then distributes it to middle and supervisory managers for implementation, rather than actively involving them in the creation process.

Question 10

Managerial accounting involves developing standardized reports according to a predetermined schedule.

Accepted Answer

Managerial accounting involves developing customized reports as and when needed, rather than following a set schedule of standardized reports.

Question 11

Horizontal analysis involves analyzing information in financial statements by expressing various accounts as percentages of a base amount.

Accepted Answer

Horizontal analysis involves comparing financial data over multiple periods to identify trends and growth patterns, not expressing accounts as percentages of a base amount.

Question 12

The CFO of Hawking Bros. Production requests his accountant Artie Anderson to prepare a customized report of the cost overruns at the company's production facility in Florida. Artie is a managerial accountant.

Accepted Answer

The task given to Artie Anderson, to prepare a customized report of cost overruns at the company's production facility, reflects the role of a managerial accountant.

Question 13

The budgeted balance sheet indicates how a firm's operations, investing, and financing activities affect its assets, liabilities, and owners' equity accounts.

Accepted Answer

The budgeted balance sheet shows the projected impact of various activities on a company's asset, liability, and equity accounts.

Question 14

The cash budget identifies when a firm might have a temporary surplus of cash that it could invest.

Accepted Answer

The cash budget helps a firm to identify its cash position over a certain period of time, which includes the cash inflows and outflows. By analyzing the cash forecast, a firm can identify when it might have a temporary surplus of cash that it could invest for short-term gains or use to pay down debt. Therefore, this statement is true.

Question 15

Information provided by managerial accounting is available to the general public.

Accepted Answer

The information provided by managerial accounting is used internally by managers for decision-making purposes and is not shared with the general public.

Question 16

A master budget combines operational and financial budgets to represent a firm's overall plan of action for a specified time period.

Accepted Answer

A master budget is a comprehensive financial planning document that combines all of the smaller, individual budgets created by different departments or areas of a company. It represents an overall plan of action for a specific period of time, usually a fiscal year, and includes both operational and financial budgets.

Question 17

The preparation of operating budgets begins with the development of a sales budget.

Accepted Answer

The sales budget is typically the first budget prepared, as it serves as the foundation for determining the level of operations and ultimately the other budgets.

Question 18

The Sarbanes­Oxley Act of 2002 prohibited business relationships that might create conflicts of interest between CPA firms and the companies they audit.

Accepted Answer

The Sarbanes-Oxley Act of 2002 did prohibit business relationships that might create conflicts of interest between CPA firms and the companies they audit, such as providing certain consulting services or owning stock in the company being audited.

Question 19

Comparative balance sheets show whether a firm's net income increased or decreased with any changes in the revenues and expenses over recent years.

Accepted Answer

Comparative balance sheets show changes in a company's financial position over time, not its net income. The statement that shows whether a firm's net income increased or decreased over time is the income statement.

Question 20

Ted runs Green America, Inc., a nursery and landscape operation. His business flourishes during spring and early summer, but he makes most of his inventory purchases in the earlier winter. He needs to be extremely careful about cash flow fluctuations. In this case, the capital expenditure budget would be the most beneficial for Ted.

Accepted Answer

A cash flow budget would be more beneficial for Ted as it helps manage the timing of cash inflows and outflows, which is crucial for handling seasonal fluctuations in his business.

Quiz 8: Accounting: Decision Making by the Numbers

Information from the cash budget, the capital expenditure budget, and the budgeted income statement are combined to form the budgeted balance sheet.

Budgeting encourages communication and coordination among managers and employees in various departments within an organization.

Operating budget documents include the cash budget and the capital expenditure budget.

Laura and Abby are evaluating three telecommunication companies to determine the best company to invest in. Horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help determine the increase in their profits.

Financial budgets identify projected sales and production goals and the various costs a firm will incur to meet these goals.

The Securities and Exchange Commission (SEC) does not require publicly traded corporations to provide comparative financial statements.

A bottomup approach to budgeting allows lower level managers to participate in the development of budgets.

Managerial accounting involves preparing financial statements for use by external stakeholders such as owners, creditors, and suppliers.

In the topdown approach to budgeting, companies allow middle and supervisory managers to participate actively in the creation of a budget.

Managerial accounting involves developing standardized reports according to a predetermined schedule.

Horizontal analysis involves analyzing information in financial statements by expressing various accounts as percentages of a base amount.

The CFO of Hawking Bros. Production requests his accountant Artie Anderson to prepare a customized report of the cost overruns at the company's production facility in Florida. Artie is a managerial accountant.

The budgeted balance sheet indicates how a firm's operations, investing, and financing activities affect its assets, liabilities, and owners' equity accounts.

The cash budget identifies when a firm might have a temporary surplus of cash that it could invest.

Information provided by managerial accounting is available to the general public.

A master budget combines operational and financial budgets to represent a firm's overall plan of action for a specified time period.

The preparation of operating budgets begins with the development of a sales budget.

The SarbanesOxley Act of 2002 prohibited business relationships that might create conflicts of interest between CPA firms and the companies they audit.

Comparative balance sheets show whether a firm's net income increased or decreased with any changes in the revenues and expenses over recent years.

Quiz 8: Accounting: Decision Making by the Numbers

Information from the cash budget, the capital expenditure budget, and the budgeted income statement are combined to form the budgeted balance sheet.

Budgeting encourages communication and coordination among managers and employees in various departments within an organization.

Operating budget documents include the cash budget and the capital expenditure budget.

Laura and Abby are evaluating three telecommunication companies to determine the best company to invest in. Horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help determine the increase in their profits.

Financial budgets identify projected sales and production goals and the various costs a firm will incur to meet these goals.

The Securities and Exchange Commission (SEC) does not require publicly traded corporations to provide comparative financial statements.

A bottom­up approach to budgeting allows lower level managers to participate in the development of budgets.

Managerial accounting involves preparing financial statements for use by external stakeholders such as owners, creditors, and suppliers.

In the top­down approach to budgeting, companies allow middle and supervisory managers to participate actively in the creation of a budget.

Managerial accounting involves developing standardized reports according to a predetermined schedule.

Horizontal analysis involves analyzing information in financial statements by expressing various accounts as percentages of a base amount.

The CFO of Hawking Bros. Production requests his accountant Artie Anderson to prepare a customized report of the cost overruns at the company's production facility in Florida. Artie is a managerial accountant.

The budgeted balance sheet indicates how a firm's operations, investing, and financing activities affect its assets, liabilities, and owners' equity accounts.

The cash budget identifies when a firm might have a temporary surplus of cash that it could invest.

Information provided by managerial accounting is available to the general public.

A master budget combines operational and financial budgets to represent a firm's overall plan of action for a specified time period.

The preparation of operating budgets begins with the development of a sales budget.

The Sarbanes­Oxley Act of 2002 prohibited business relationships that might create conflicts of interest between CPA firms and the companies they audit.

Comparative balance sheets show whether a firm's net income increased or decreased with any changes in the revenues and expenses over recent years.

A bottomup approach to budgeting allows lower level managers to participate in the development of budgets.

In the topdown approach to budgeting, companies allow middle and supervisory managers to participate actively in the creation of a budget.

The SarbanesOxley Act of 2002 prohibited business relationships that might create conflicts of interest between CPA firms and the companies they audit.