Question 1

The procedure used by accountants to convert data about individual transactions to financial statements is called _____.
A)the cash flow method
B)the statement of owners' equity
C)the accounting cycle
D)the balance sheet

Accepted Answer

The accounting cycle is the process used by accountants to convert data about individual transactions into financial statements. This process includes several steps such as analyzing transactions, journalizing transactions, posting to the general ledger, preparing an unadjusted trial balance, making adjusting entries, preparing an adjusted trial balance, preparing financial statements, and closing the books. The other options listed, such as the cash flow method, statement of owners' equity, and balance sheet, are all individual components or reports that may be prepared as part of the overall accounting cycle.

Question 2

The _____ was created by the Sarbanes-Oxley Act of 2002.
A)Securities & Exchange Commission
B)Public Accounting Oversight Board
C)GAAP
D)FASB

Accepted Answer

The Public Accounting Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act of 2002 to oversee the auditing of public companies and to protect the interests of investors. The Securities & Exchange Commission (SEC) existed prior to this act and is responsible for enforcing federal securities laws. Generally Accepted Accounting Principles (GAAP) are a set of accounting standards, and the Financial Accounting Standards Board (FASB) is the organization that sets those standards. Neither of these were created by the Sarbanes-Oxley Act.

Question 3

Who appoints the members of the Public Company Accounting Oversight Board?
A)FASB
B)American Association of CPAs
C)Federal Trade Commission
D)Securities and Exchange Commission

Accepted Answer

The members of the Public Company Accounting Oversight Board (PCAOB) are appointed by the Securities and Exchange Commission (SEC). The PCAOB was established in 2002 by the Sarbanes-Oxley Act following high-profile accounting scandals such as Enron and WorldCom. The PCAOB is responsible for overseeing the auditing of public companies to protect investors and ensure accurate financial reporting.

Question 4

A(n)_____ is a financial statement that is directly based on the accounting equation.
A)balance sheet
B)income statement
C)statement of cash flows
D)statement of changes in retained earnings

Accepted Answer

The balance sheet is directly based on the accounting equation, which states that Assets = Liabilities + Equity. The balance sheet lists a company's assets, liabilities, and equity at a specific point in time, and the totals of the assets and liabilities must equal the total of the equity. The other options, such as the income statement, statement of cash flows, and statement of changes in retained earnings, are important financial statements as well but are not directly based on the accounting equation.

Question 5

The rapidly growing field of _____ involves investigating white-collar crimes such as business fraud,improper financial reporting,and illegal investment schemes.
A)budgeting
B)public accounting
C)forensic accounting
D)internal auditing

Accepted Answer

Forensic accounting involves investigating and analyzing financial information in order to detect and prevent fraud or other financial crimes. It involves using accounting, auditing, and investigative skills to analyze financial documents and identify any irregularities or fraudulent activities. This field is specifically focused on white-collar crimes, which often involve businesses and corporations. Budgeting involves the process of creating and managing budgets, public accounting involves providing accounting services to external clients, and internal auditing involves examining and evaluating a company's internal controls and financial reporting processes.

Question 6

Haley is a corporate certified public accountant (CPA)working on a new budget.When she lists the company's liabilities,which of the following will she include?
A)Computer software
B)Owners' equity
C)Marketable securities
D)Employees' wages and salaries

Accepted Answer

Liabilities represent debts owed by a company to others, and employees' wages and salaries would fall under this category. Computer software and marketable securities would be considered assets, and owners' equity represents the investments made by the owners of the company.

Question 7

All of the following are tangible assets EXCEPT _____.
A)cash
B)patents
C)building
D)inventory

Accepted Answer

Patents are an intangible asset, as they represent the exclusive right to use and profit from an invention or process. The other options (cash, building, and inventory) are all examples of tangible assets, meaning they have physical form and can be touched or seen.

Question 8

All of the following are liabilities EXCEPT _____.
A)accumulated profits not paid in dividends
B)accounts payable
C)bank loans
D)wages payable

Accepted Answer

Accumulated profits not paid in dividends are considered retained earnings, which is a component of shareholders' equity, not a liability. Choices B-D are all considered liabilities.

Question 9

Which of the following represents the accounting equation?
A)Assets + Liabilities = Owners' Equity
B)Assets = Liabilities + Owners' Equity
C)Liabilities = Assets + Owners' Equity
D)Owners' Equity - Liabilities = Assets

Accepted Answer

The accounting equation is a fundamental principle of accounting and states that assets must always equal the sum of liabilities and owners' equity. This can be represented as Assets = Liabilities + Owners' Equity.

Question 10

All of the following are assets EXCEPT _____.
A)inventory
B)cash
C)patents
D)bank loans

Accepted Answer

Bank loans are not assets, but liabilities as they represent money owed to someone else. The other options (inventory, cash, and patents) are all assets.

Question 11

Milwaukee Fabrication has $80 million in assets and $50 million in owners' equity.How much does the firm have in liabilities?
A)$80 million
B)$50 million
C)$30 million
D)$20 million

Accepted Answer

The total assets of the firm are equal to the sum of its liabilities and owners' equity.

Assets = Liabilities + Owners' equity

$80 million = Liabilities + $50 million

Liabilities = $80 million - $50 million

Liabilities = $30 million

Question 12

Roger has been hired to collect and record financial transactions and prepare financial statements for a Christian organization affiliated to a church,which makes him a _____.
A)not-for-profit accountant
B)government accountant
C)public accountant
D)management accountant

Accepted Answer

The fact that the organization Roger is working for is affiliated to a church suggests that it is a not-for-profit organization. Therefore, Roger's role as a financial record-keeper and preparer of financial statements is that of a not-for-profit accountant. Government accountants work for government agencies, public accountants provide accounting services to multiple clients, and management accountants usually work for private businesses to assist with internal decision-making.

Question 13

Public accountants typically perform all of the following tasks for a business client EXCEPT _____.
A)tax planning
B)reviewing a firm's financial statements
C)developing the firm's marketing strategy
D)management consulting

Accepted Answer

Public accountants may assist clients with tax planning, reviewing financial statements, and providing management consulting services, but they typically do not develop a firm's marketing strategy. Marketing strategy development may fall under the purview of a marketing or advertising agency.

Question 14

Frank,chief financial officer for a company,wants to take a look at the summary of expenses,revenues,and profits of the firm for the most recent quarter.He can best find this information by consulting the _____.
A)balance sheet
B)cash flow statement
C)statement of owners' equity
D)income statement

Accepted Answer

The income statement summarizes the revenues, expenses, and profits of a company over a specific period, usually a quarter or a year. The balance sheet shows the company's financial position at a specific point in time, while the cash flow statement shows the inflow and outflow of cash in a company over a specific period. The statement of owners' equity shows the changes in the equity of a company over a specific period. Therefore, the best choice for Frank to find the summary of expenses, revenues, and profits for the most recent quarter is the income statement.

Question 15

Jayce Products buys a $500,000 machine by taking out a bank loan.The company's assets will _____ by $500,000 while its liabilities will _?____?? by $500,000.
A)rise;rise
B)fall;fall
C)rise;fall
D)fall;rise

Accepted Answer

The company's assets will rise by $500,000 because the machine is an asset. Its liabilities will also rise by $500,000 because the bank loan is a liability.

Question 16

Which of the following financial statements shows a company's financial position on a particular date?
A)Statement of changes in retained earnings
B)Income statement
C)Statement of cash flows
D)Balance sheet

Accepted Answer

The balance sheet shows a company's financial position on a particular date by listing its assets, liabilities, and equity. The other financial statements (income statement, statement of changes in retained earnings, and statement of cash flows) show the company's financial performance over a period of time, not its position on a specific date.

Question 17

Preston performs professional services similar to those of a management accountant while working for the city of Portland.Preston can best be described as a _____.
A)public accountant
B)cost accountant
C)tax accountant
D)government accountant

Accepted Answer

Preston works for the government, specifically for the city of Portland, and performs professional services similar to those of a management accountant. Therefore, he can best be described as a government accountant.

Question 18

To provide reliable,consistent,and unbiased information to decision makers,accountants follow guidelines,or standards,known as _____.
A)the accounting process
B)the accounting system
C)generally accepted accounting principles (GAAP)
D)Financial Accounting Standards Board (FASB)

Accepted Answer

Generally accepted accounting principles (GAAP) provide a framework for accountants to follow in order to ensure that their financial reporting is reliable, consistent, and unbiased. The Financial Accounting Standards Board (FASB) is responsible for setting and updating these standards. However, while the accounting process and accounting system are both important components of accounting, they do not provide the specific guidelines needed to ensure reliable financial reporting.

Question 19

Maxwell is not an employee of the Edith Corporation,but he was hired as a management consultant to provide unbiased advice about Edith Corporation's financial condition.Maxwell is a(n)_____.
A)public accountant
B)government accountant
C)internal auditor
D)management accountant

Accepted Answer

Maxwell is a public accountant because he is an external consultant providing independent advice, rather than being an employee or internal auditor of the corporation.

Question 20

Elena works for a mid-sized manufacturing company.Her responsibility is to examine the company's financial practices to ensure that records include accurate data and that the company's operations are in compliance with federal,state,and local laws and regulations.Elena is a(n)_____.
A)government accountant
B)cost accountant
C)tax accountant
D)internal auditor

Accepted Answer

Elena's role as someone who examines the company's financial practices and ensures compliance with regulations is most closely aligned with the responsibilities of an internal auditor. Government accountants typically work for government agencies, cost accountants focus on analyzing costs for the company, and tax accountants specialize in preparing tax returns and providing tax advice.

Quiz 15: Understanding Accounting and Financial Statements

The procedure used by accountants to convert data about individual transactions to financial statements is called _____.

The _____ was created by the Sarbanes-Oxley Act of 2002.

Who appoints the members of the Public Company Accounting Oversight Board?

A(n) _____ is a financial statement that is directly based on the accounting equation.

The rapidly growing field of _____ involves investigating white-collar crimes such as business fraud,improper financial reporting,and illegal investment schemes.

Haley is a corporate certified public accountant (CPA) working on a new budget.When she lists the company's liabilities,which of the following will she include?

All of the following are tangible assets EXCEPT _____.

All of the following are liabilities EXCEPT _____.

Which of the following represents the accounting equation?

All of the following are assets EXCEPT _____.

Milwaukee Fabrication has $80 million in assets and $50 million in owners' equity.How much does the firm have in liabilities?

Roger has been hired to collect and record financial transactions and prepare financial statements for a Christian organization affiliated to a church,which makes him a _____.

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

Frank,chief financial officer for a company,wants to take a look at the summary of expenses,revenues,and profits of the firm for the most recent quarter.He can best find this information by consulting the _____.

Jayce Products buys a $500,000 machine by taking out a bank loan.The company's assets will _____ by $500,000 while its liabilities will _?____?? by $500,000.

Which of the following financial statements shows a company's financial position on a particular date?

Preston performs professional services similar to those of a management accountant while working for the city of Portland.Preston can best be described as a _____.

To provide reliable,consistent,and unbiased information to decision makers,accountants follow guidelines,or standards,known as _____.

Maxwell is not an employee of the Edith Corporation,but he was hired as a management consultant to provide unbiased advice about Edith Corporation's financial condition.Maxwell is a(n) _____.

Elena works for a mid-sized manufacturing company.Her responsibility is to examine the company's financial practices to ensure that records include accurate data and that the company's operations are in compliance with federal,state,and local laws and regulations.Elena is a(n) _____.