Question 1

Through the generally accepted accounting principles (GAAP), the Financial Accounting Standards Board (FASB)aims to ensure that financial statements are _____.
A)comprehensive, exhaustive, extensive, and independent
B)relevant, reliable, consistent, and comparable
C)cursory, intensive, unabridged, and superficial
D)circumstantial, inferential, presumptive, and provisional

Accepted Answer

GAAP aims to ensure that financial statements are relevant, reliable, consistent, and comparable to help users make informed decisions. These principles provide a framework for the preparation and presentation of financial reports.

Question 2

Which of the following bodies makes U.S. accounting practices more consistent with those in other nations along with the Financial Accounting Standards Board (FASB)?
A)The Financial Accounting Foundation (FAF)
B)The International Accounting Standards Board (IASB)
C)The U.S. Federal Reserve (Fed)
D)The Securities and Exchange Commission (SEC)

Accepted Answer

The International Accounting Standards Board (IASB) works to develop and implement global accounting standards in order to achieve consistency across nations. The Financial Accounting Standards Board (FASB) is primarily responsible for accounting standards within the United States, but it does work with the IASB to develop and implement global standards. The Financial Accounting Foundation (FAF) is responsible for appointing members to the FASB and the Governmental Accounting Standards Board (GASB). The U.S. Federal Reserve (Fed) is responsible for monetary policy and the Securities and Exchange Commission (SEC) regulates financial markets and accounting disclosure.

Question 3

Accounting systems are utilized by companies for several reasons, but they have little value when it comes to making economic decisions.

Accepted Answer

Accounting systems are important tools for companies to track their financial transactions, create financial statements, and comply with tax laws. However, they also provide valuable information to managers for making economic decisions such as analyzing costs, assessing profitability, and forecasting future financial performance. Therefore, accounting systems have significant value in making economic decisions.

Question 4

Betty's job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n)_____.
A)management consultant
B)government accountant
C)internal auditor
D)certified public accountant

Accepted Answer

The answer of Betty's job entails detecting problems such as...

Question 5

Which of the following is a key external user of a company's accounting information?
A)Competitors
B)Managers
C)Employees
D)Departmental managers

Accepted Answer

Competitors are a key external user of a company's accounting information. They may use the information to analyze the company's financial performance and make strategic decisions. Other external users include investors, creditors, customers, and regulatory bodies.

Question 6

Since it deals strictly with numbers, the practice of accounting is free from ethical obligations.

Accepted Answer

While accounting may involve a great deal of quantitative analysis, it is not entirely devoid of ethical considerations. For example, accountants are often responsible for ensuring that financial records are accurate and transparent, which requires a commitment to honesty and integrity. Moreover, accountants may be called upon to make ethical judgments regarding issues such as revenue recognition, expense categorization, and asset valuation. Ultimately, while accounting is largely about numbers, it is also a profession that requires a commitment to ethical principles and practices.

Question 7

Which of the following statements is true of the Financial Accounting Standards Board (FASB)?
A)Its authority comes from the Internal Revenue Service.
B)It consists of five members appointed by the Federal Trade Commission (FTC).
C)Its members can be reappointed to serve one additional term.
D)Its members can retain ties with firms in which they were previously employed.

Accepted Answer

The FASB consists of seven members who can serve two five-year terms, for a total of ten years. Therefore, its members can be reappointed to serve one additional term. Option A is incorrect because the FASB's authority comes from the Securities and Exchange Commission (SEC), not the Internal Revenue Service. Option B is incorrect because the FASB members are appointed by the Financial Accounting Foundation, not the FTC. Option D is incorrect as members of the FASB must sever ties with any firms they were previously employed with before joining the board.

Question 8

Liabilities do not include bank loans and current payments owed to suppliers.

Accepted Answer

Liabilities do include bank loans and current payments owed to suppliers. Liabilities are debts or obligations that a company owes to others and can include loans, accounts payable, and other debts.

Question 9

The CFO of SpotLight Production Company requests his accountant Felipe to prepare a customized report of the cost overruns at the company's production facility in L.A.Felipe is a managerial accountant.

Accepted Answer

The answer of The CFO of SpotLight Production Company requests...

Question 10

John and Elizabeth 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

Horizontal analysis compares financial statements of a company over multiple years to determine changes in financial performance, making it a useful tool for comparing multiple companies and determining which one is performing better in terms of profits.

Question 11

A firm's operating budget represents a firm's overall plan of action for a specified time period.

Accepted Answer

The answer of A firm's operating budget represents a firm's...

Question 12

Alexis decides to check with his accountant how much money his company owes to the raw materials supplier. To determine that, Alexis needs to ask his accountant to provide him with the company's balance sheet.

Accepted Answer

The balance sheet is a financial statement that provides a snapshot of a company's financial health at a specific point in time. It shows the company's assets, liabilities, and equity. The balance sheet can be used to determine how much money a company owes to its creditors, including its raw materials suppliers.

Question 13

The heavy reliance on accounting information by business stakeholders has led to it sometimes being called the:
A)language of business.
B)cornerstone of business.
C)lifeblood of business.
D)standard of business.

Accepted Answer

Accounting is often referred to as the "language of business" because it communicates and summarizes financial information in a standardized way that can be easily understood by all stakeholders, including investors, creditors, regulators, and managers.

Question 14

In order to preserve independence and impartiality, Financial Accounting Standards Board (FASB)members are required to:
A)serve the board for the rest of their lives once they are appointed.
B)sever all ties with any firms or institutions they served prior to joining the board.
C)sign a non-disclosure agreement and hand over all information of their previous companies to the board.
D)pass a rigorous two-day, four-part examination on major accounting concepts.

Accepted Answer

FASB members are required to sever all ties with any firms or institutions they served prior to joining the board in order to preserve independence and impartiality. This helps to minimize any potential conflicts of interest that may arise.

Question 15

The members of the Financial Accounting Standards Board (FASB)are appointed by the Securities and Exchange Commission.

Accepted Answer

The answer of The members of the Financial Accounting Standards...

Question 16

Matt is asked by Clint Publishers to carry out an external audit of its books. He is also asked to prepare the tax returns for another client, Mrs. Zhirkov. Matt is a _____.
A)public accountant
B)management accountant
C)government accountant
D)cost accountant

Accepted Answer

Matt is an external auditor for Clint Publishers, which falls under the purview of public accounting. Additionally, he is preparing tax returns for a client, making him a public accountant providing tax services. Therefore, Option A (public accountant) is the correct answer. The other options do not fit the scenario described. Management accounting deals with internal accounting and decision-making for a specific company, while government accounting involves managing financial activities for government entities. Cost accounting involves measuring and analyzing the costs associated with producing goods or services.

Question 17

Sebastian is an employee of Power Trans Inc.His duties include preparing reports and analyzing company accounting data.He also appraises financial performances, verifies the accuracy and validity of the company's internal records and accounting procedures. Sebastian's role is that of a _____.
A)forensic accountant
B)government auditor
C)certified fraud examiner
D)management accountant

Accepted Answer

Sebastian's duties involve analyzing financial data for internal purposes and making recommendations to management. This aligns with the role of a management accountant, who helps organizations plan and control their operations by providing financial and non-financial information. A forensic accountant investigates financial crimes, a government auditor examines the financial records of government agencies, and a certified fraud examiner detects and investigates fraud in organizations. These roles do not fully capture Sebastian's responsibilities.

Question 18

Felix runs Green Zone Inc., a nursery and landscaping venture. His business flourishes during spring and early summer, but he made most of his inventory purchases during winter of theyear before. Hence, he needs to be extremely careful about cash flow fluctuations. In this case, the capital expenditure budget would be the most beneficial option for Felix.

Accepted Answer

A cash flow budget would be more beneficial for Felix as it helps manage the timing of cash inflows and outflows, which is crucial given the seasonal nature of his business.

Question 19

_____ is a branch of accounting that addresses the needs of external stakeholders, including stockholders, creditors, and government regulators.
A)Forensic accounting
B)Investigative accounting
C)Managerial accounting
D)Financial accounting

Accepted Answer

Financial accounting focuses on the preparation of financial statements that are used by external stakeholders to make decisions about the financial health of a company. This includes stockholders, creditors, and government regulators who rely on companies to provide accurate and timely financial information about their operations. Forensic accounting and investigative accounting are specialized fields within accounting that focus on uncovering fraud or financial irregularities, while managerial accounting deals with providing information to internal stakeholders to help them make better business decisions.

Question 20

Government accountants primarily use accounting information to meet the reporting needs of federal and state agencies.

Accepted Answer

Government accountants are responsible for preparing financial reports and documents for federal and state agencies. They use accounting information to ensure that financial activities are properly recorded and reported in accordance with government regulations and standards.

Quiz 8: Accounting: Decision Making by the Numbers

Through the generally accepted accounting principles (GAAP) , the Financial Accounting Standards Board (FASB) aims to ensure that financial statements are _____.

Which of the following bodies makes U.S. accounting practices more consistent with those in other nations along with the Financial Accounting Standards Board (FASB) ?

Accounting systems are utilized by companies for several reasons, but they have little value when it comes to making economic decisions.

Betty's job entails detecting problems such as embezzlement, waste, mismanagement, and employee theft at her organization. In this case, Betty is a(n) _____.

Which of the following is a key external user of a company's accounting information?

Since it deals strictly with numbers, the practice of accounting is free from ethical obligations.

Which of the following statements is true of the Financial Accounting Standards Board (FASB) ?

Liabilities do not include bank loans and current payments owed to suppliers.

The CFO of SpotLight Production Company requests his accountant Felipe to prepare a customized report of the cost overruns at the company's production facility in L.A.Felipe is a managerial accountant.

John and Elizabeth 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.

A firm's operating budget represents a firm's overall plan of action for a specified time period.

Alexis decides to check with his accountant how much money his company owes to the raw materials supplier. To determine that, Alexis needs to ask his accountant to provide him with the company's balance sheet.

The heavy reliance on accounting information by business stakeholders has led to it sometimes being called the:

In order to preserve independence and impartiality, Financial Accounting Standards Board (FASB) members are required to:

The members of the Financial Accounting Standards Board (FASB)are appointed by the Securities and Exchange Commission.

Matt is asked by Clint Publishers to carry out an external audit of its books. He is also asked to prepare the tax returns for another client, Mrs. Zhirkov. Matt is a _____.

Sebastian is an employee of Power Trans Inc.His duties include preparing reports and analyzing company accounting data.He also appraises financial performances, verifies the accuracy and validity of the company's internal records and accounting procedures. Sebastian's role is that of a _____.

_____ is a branch of accounting that addresses the needs of external stakeholders, including stockholders, creditors, and government regulators.

Government accountants primarily use accounting information to meet the reporting needs of federal and state agencies.