Question 1

What is the purpose of the balance sheet? Explain how it is it organized.

Accepted Answer

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Question 2

Olga owns a business and is reviewing her company's current financial statements.As a user of accounting information,Olga is most interested in using this information to ________.

Accepted Answer

As a business owner, Olga would be most interested in using the financial statements to plan and control the operations of her business, such as making decisions about investments or cost reductions. While evaluating credit risk and tax liabilities may be important, they are not the primary focus for a business owner reviewing financial statements. Additionally, approving new issues of stocks and bonds would be a decision made by the company's board of directors or other financial professionals, not necessarily the owner.

Question 3

Morgan works for a travel agency.Her job involves preparing financial reports and interpreting those reports to provide information for decision making.Which title is appropriate for Morgan's job?

Accepted Answer

Morgan's job involves preparing financial reports and interpreting those reports to provide information for decision making, which is a typical role for an accountant. Investors are individuals or entities that provide capital to a business for a return on investment, and systems analysts and auditors have different job duties that do not align with Morgan's responsibilities.

Question 4

Explain the differences between public accountants and management accountants.

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Question 5

Julie is evaluating which state her company will expand into next.She is engaged in the ________ activity.

Accepted Answer

Julie is engaged in the investing activity as she is evaluating potential locations for expansion, which involves making decisions about where to allocate resources for future growth.

Question 6

Explain how exchange rates influence international accounting practices.Why was the International Accounting Standards Committee established?

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Question 7

Professionals who are responsible for gathering,recording,reporting,and interpreting the financial information of an organization are ________.

Accepted Answer

Accountants are professionals who are responsible for gathering, recording, reporting, and interpreting the financial information of an organization. They play a vital role in the financial management of a company and provide information that helps managers in decision-making processes. Statisticians specialize in the analysis of numerical data and may work with financial data, but they do not typically focus on financial reporting and accounting. IRS agents work for the government and are responsible for enforcing tax laws and regulations; they do not gather or interpret financial information for organizations. While managers may use financial information to make decisions, they are not specifically responsible for gathering or interpreting it.

Question 8

Identify and briefly describe the four categories of financial ratios.

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Question 9

What is accrual accounting? How does depreciation affect net income and cash flow?

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Question 10

________ activities provide the necessary funds to start a business and to expand it after it begins operations.

Accepted Answer

Financing activities involve obtaining the necessary funds to start or expand a business, such as through taking out loans, issuing bonds, or obtaining investments from shareholders. Investing activities involve using those funds to acquire assets such as property, plant, and equipment, and operating activities involve using those assets and funds to conduct the day-to-day operations of the business. Selling activities involve generating revenue from the sale of products or services. Therefore, financing activities best fit the description of providing necessary funds to start and expand a business.

Question 11

Describe the purpose of budgets in a business.

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Question 12

Explain the accounting equation.

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Question 13

Define GAAP and explain its purpose.

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Question 14

________ activities focus on providing valuable assets to a business.

Accepted Answer

Investing activities involve acquiring and disposing of long-term assets such as property, equipment, and investments. By acquiring valuable assets, a business can enhance its overall value and performance. Marketing activities involve promoting the business and its products or services to potential customers. Selling activities involve generating revenue by selling products or services to customers. Operating activities involve the day-to-day operations of the business such as manufacturing, distributing, and delivering products or services. While marketing, selling, and operating activities are all important for a business, investing activities specifically focus on acquiring valuable assets.

Question 15

Explain the purpose of the Sarbanes-Oxley Act.

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Question 16

________ activities focus on selling goods and services.

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Question 17

The natural progression of a business begins with ________.

Accepted Answer

The natural progression of a business typically begins with financing, as businesses need to secure funds to start operations and invest in resources.

Question 18

Sri manages the sales force for his company.He is engaged in the ________ activity.

Accepted Answer

Sri's role involves managing the sales force, which is an operating activity. Accounting involves keeping track of financial transactions, financing involves securing and managing funding, and investing involves allocating capital for the purpose of generating returns. None of these activities describe Sri's role as a sales force manager.

Question 19

Public accountants typically perform all of the following tasks for a business client EXCEPT ________.

Accepted Answer

Developing the firm's marketing strategy is not typically within the scope of services provided by public accountants. The other tasks listed (reviewing financial statements, tax planning, and management consulting) are all common tasks performed by public accountants.

Question 20

Ricardo is a loan officer for a bank and is reviewing the financial statements of a prospective borrower.As a user of accounting information,Ricardo is most interested in using this information ________.

Accepted Answer

As a loan officer, Ricardo's primary concern is to evaluate the creditworthiness of a prospective borrower. Therefore, he would be most interested in using the financial statements to evaluate credit risk. The other options, such as making investment decisions, contract negotiations, and planning and control, are typically not within the scope of a loan officer's responsibilities.

Quiz 15: Understanding Accounting and Financial Statements