Deck 14: Accounting and Financial Statements

Question 1

Vikram is an accountant employed by a large corporation.He works for the billing and taxation department.He is most likely to be a:

A)public accountant.
B)private accountant.
C)legal accountant.
D)junior accountant.
E)senior accountant.

Answer 1

B

Question 2

A Certified Public Accountant has the right to:

A)express,officially,an unbiased opinion regarding the accuracy of a client's financial statements.
B)publicly express a biased opinion about the accuracy of a firm's financial statements.
C)express his or her personal opinion in all financial matters.
D)handle every firm's reports by different rules.
E)limit the types of assets commercial banks can buy.

Answer 2

A

Question 3

The _____ required firms to be more rigorous in their accounting and reporting practices.

A)Sarbanes-Oxley Act
B)Celler-Kefauver Act
C)Williams Act
D)Glass-Steagall Act
E)Gram-Leach-Bliley Act

Answer 3

A

Question 4

CPA stands for:

A)Credentialed Public Accountant.
B)Credentialed Private Accountant.
C)Certified Private Accountant.
D)Certified Public Accountant.
E)Certified Professional Accountant.

Question 5

Evelyn is a self-employed,state-certified accountant who provides the following accounting services - filing tax returns,preparing financial records,auditing corporate financial records.She is known as a:

A)private accountant.
B)certified management accountant.
C)certified public accountant.
D)noncertified accountant.
E)forensic accountant.

Question 6

_____ involves analyzing financial documents in search of fraudulent entries or financial misconduct.

A)Financial accounting
B)Management accounting
C)Operational accounting
D)Forensic accounting
E)Tax accounting

Question 7

_____ is the movement of money through an organization over a daily,weekly,monthly,or yearly basis.

A)Expenses trajectory
B)Income trajectory
C)Assets flow
D)Liabilities
E)Cash flow

Question 8

The terms accounting and bookkeeping are interchangeable.

Question 9

Accounting refers to the process of:

A)recording,measuring,and interpreting financial information.
B)producing goods and services.
C)reporting to only those within the organization.
D)reporting to only those outside the organization.
E)developing promotional plans.

Question 10

Which of the following statements is true of Certified Public Accountant?

A)They are required to be self-employed and cannot be a part of private firms.
B)They are required to be members of large public accounting firms and cannot be self-employed.
C)They have the right to express,officially,a biased opinion regarding the accuracy of a client's financial statements.
D)They provide services ranging from the preparation of financial records to the filing of tax returns.
E)They are appointed by the government and cannot be hired by private corporations.

Question 11

Individuals and businesses can hire a _____ to,an individual,to provide accounting services ranging from the preparation of financial records and the filing of tax returns to complex audits of corporate financial records.

A)Certified Fraud Examiner
B)Certified Public Accountant
C)Certified Private Accountant
D)Certified Management Accountant
E)Certified Forensic Accountant

Question 12

The balance sheet indicates what an organization owns or controls.

Question 13

Cash from investing activities is calculated from changes in the long-term liability accounts and the contributed capital accounts in owners' equity.

Question 14

Which of the following is a requirement stated by the Sarbanes-Oxley Act?

A)This act requires that the Federal Reserve Board take up the task of certifying public accountants.
B)This act requires firms to separate their consulting and auditing businesses.
C)This act limits the types of assets commercial banks can buy.
D)This act limits the use of derivative instruments.
E)This act requires that firms employ their own private accountants.

Question 15

Non-business entities typically obtain revenues through the sale of their assets.

Question 16

Which of the following statements is true of bookkeeping?

A)Bookkeeping involves understanding and interpreting sophisticated accounting systems to classify financial information.
B)Bookkeeping involves developing sophisticated accounting systems.
C)Bookkeeping is a process that requires extensive training.
D)Bookkeeping is a broader term than accounting.
E)Bookkeeping involves day-to-day recording of business transactions.

Question 17

In accounting,a ledger is a time-ordered list of accounting transactions.

Question 18

Which of the following is a function of the Public Company Accounting Oversight Board?

A)It provides relief to banks during financial crisis.
B)It ensures that accounting firms do not separate their consulting and auditing businesses.
C)It makes rules and policies for accounting firms and businesses.
D)It overlooks the accounts department of the federal government.
E)It certifies individuals to provide accounting services.

Question 19

The _____ limits the types of assets commercial banks can buy; the amount of capital they must maintain; and the use of derivative instruments such as options,futures,and structured investment products.

A)Sarbanes-Oxley Act
B)Dodd-Frank Act
C)Glass-Steagall Act
D)Gramm-Leach-Bliley Act
E)Celler-Kefauver Act

Question 20

A forensic accountant:

A)investigates crime scenes.
B)works for a public corporation.
C)analyzes financial documents in search of fraudulent entries or financial misconduct.
D)analyzes annual reports to ensure that corporations have adequate corporate governance mechanisms.
E)investigates workplace accidents to determine fault.

Question 21

Which of the following is the first step in the accounting cycle?

A)Record transactions
B)Examine source documents
C)Post transactions
D)Prepare financial statements
E)Generate annual reports

Question 22

What is the last step that must be taken before a firm's books can be closed for an accounting cycle?

A)The annual reports must be prepared.
B)The journal must be filled out.
C)The information from the journal must be transferred to the ledger.
D)A certified public accountant must attest that generally accepted accounting principles were used.
E)The trial balance must be verified.

Question 23

Which of the following equations is equivalent to the accounting equation?

A)Equity = liabilities - assets
B)Owners' equity = assets - liabilities
C)Revenues - expenses = net income
D)Net income = expenses - revenues + taxes
E)Profit = sales - revenues

Question 24

What are the fundamentals of the accounting process?

A)Journals and ledgers
B)The accounting equation and the double-entry bookkeeping system
C)The accounting equation and the accounting cycle
D)The double-entry bookkeeping system and the accounting cycle
E)Ledgers and financial statements

Question 25

The single most important component of an annual report is the:

A)balance sheet.
B)income statement.
C)cash flow statement.
D)signature of a Certified Public Accountant.
E)signature of the firm's owners or stakeholders.

Question 26

Potential investors typically study the _____ in a firm's annual report to determine whether the company meets their investment requirements.

A)product list
B)growth plans
C)mission statement
D)corporate information
E)financial statements

Question 27

Double-entry bookkeeping is a system of recording and classifying business transactions:

A)by the amount of the transaction.
B)in separate accounts in order to balance the accounting equation.
C)in all accounts including those that do not maintain the accounting equation.
D)in general ledgers.
E)in the same account.

Question 28

An income statement shows:

A)assets,liabilities,and equity.
B)an organization's profitability over a period of time.
C)the company's variable costs at a particular point in time.
D)how much income each employee earned.
E)how much income the CEO earns per year.

Question 29

A long-term lender,when lending money is more interested in a company's _____ and indebtedness to other lenders.

A)operating revenues
B)interest rates
C)profitability
D)mission statement
E)vision statement

Question 30

Which of the following represents a firm's liability?

A)Cash
B)Inventory
C)Land
D)Equipment
E)Loan

Question 31

A short-term lender examines a firm's _____ to assess its ability to repay a loan quickly with cash generated from sales.

A)indebtedness
B)profitability
C)cash flow
D)assets
E)cash equity

Question 32

An equivalent term for net income in accounting terms is:

A)gross income.
B)gross profit.
C)goods or services sold.
D)profit after taxes.
E)operating income.

Question 33

Nina,a manager at a small restaurant,is engaged in conducting the accounting cycle.She begins by examining checks,credit card receipts,sales slips,and other related evidence concerning specific transactions.Which of the following steps should she follow immediately after this step?

A)The annual reports must be prepared.
B)The financial transactions must be recorded in a journal.
C)The information from the journal must be transferred to a ledger.
D)The hired Certified Public Accountant must attest that generally accepted accounting principles were used.
E)The information from the trial balance should be used to prepare the financial statements.

Question 34

What is meant by owners' equity?

A)It refers to a firm's economic resources.
B)It refers to a firm's "goodwill" or reputation.
C)It refers to debts a firm owes to others.
D)It refers to outstanding loans and credit that a firm has to return.
E)It refers to the money contributed to a firm that never has to be paid back.

Question 35

Deviations between expected operating expenses and _____ serve as a "feedback loop" to launch more detailed financial analyses in an effort to pinpoint trouble spots and opportunities.

A)fixed operating costs
B)variable operating costs
C)operating revenues
D)basic operating costs
E)overhead operating expenses

Question 36

In the accounting cycle,after examining source documents and recording transactions in an accounting journal,what is the next step taken by a financial manager?

A)Closing the books
B)Posting recorded transactions
C)Gathering credit card receipts
D)Preparing a trial balance
E)Balancing the accounting equation

Question 37

The principal value of a budget lies in its:

A)breakdown of cash inflows and outflows.
B)forecast of income and expenses over a period of time.
C)purpose of control over expenditures.
D)evaluation of the firm's performance.
E)development of a strategic financial plan.

Question 38

Clara's Label owes certain debts to the Small Business Administration and her suppliers.In accounting,these debts are known as _____.

A)owners' equity
B)assets
C)liabilities
D)stock
E)bonds

Question 39

Thomson is a manager at a bank.He has to decide whether to lend an amount of $10,000 to Safe Toy.He should:

A)approve the loan application without checking the company's credibility.
B)review the company's financial statements.
C)prepare an organizational budget.
D)report the organization's financial performance to outsiders.
E)turn down the loan application.

Question 40

An accounting term that is interchangeable with revenue is:

A)services.
B)expenses.
C)net income.
D)sales.
E)price.

Question 41

The _____ presents a snapshot of an organization's financial position at a given moment.

A)profit margin
B)statement of cash flows
C)net income
D)per share data
E)balance sheet

Question 42

The net income of a company is equal to the total profit or loss minus:

A)assets and liabilities.
B)equity.
C)sales.
D)expenses,including taxes.
E)income and profits.

Question 43

_____ refers to money owed a company by its clients or customers who have promised to pay for the products at a later date.

A)Accounts payable
B)Accounts receivable
C)Current assets
D)Current liabilities
E)Balance sheet

Question 44

Depreciation,a type of expense account,is included in the:

A)interest category.
B)selling category.
C)general and administrative category.
D)research and development category.
E)retained category.

Question 45

Do-It-Yourself Home Repair Shop started the accounting period with $10,000 worth of shovels in inventory.During the accounting period,it purchased $5,000 worth of shovels and sold $7,500 worth.In this scenario,what is the cost of goods sold?

A)$15,000
B)$2,500
C)$5,000
D)$7,500
E)$10,000

Question 46

All asset accounts are listed in descending order of _____.

A)investments
B)inventory
C)revenues
D)liquidity
E)accounts receivable

Question 47

At the end of each accounting period,the dollar amounts in all the revenue and expense accounts are moved into an account called _____.

A)net earnings
B)net expense
C)interest expense
D)retained expense
E)retained earnings

Question 48

The process of spreading the costs of long-lived assets such as buildings and equipment over the total number of accounting periods in which they are expected to be used is called _____.

A)depreciation
B)gross profit
C)budget
D)net income
E)revenue

Question 49

Net income is:

A)earnings after all expenses have been deducted.
B)valuation of assets after all taxes are paid.
C)liabilities after taxes.
D)expenses after taxes.
E)cash disbursements after taxes.

Question 50

_____ is the total amount of money received from the sale of goods or services,as well as from other business activities such as the rental of property and investments.

A)Profit
B)Expense
C)Net income
D)Revenue
E)Price

Question 51

Derek,an accountant,allocates the cost of a piece of earth-moving equipment over a specific period of time.Based on the given information,it can be concluded that Derek is implementing the process of:

A)cost plus pricing.
B)appreciation.
C)discounting.
D)expense designation.
E)depreciation.

Question 52

When a company wants to place a value on a physical asset for its balance sheet,it must:

A)reduce the value by the amount the asset has depreciated.
B)auction the asset off.
C)ask its competitors what the asset is worth.
D)price a new one.
E)increase the value by the amount the asset has appreciated.

Question 53

Non-business entities typically obtain revenue through:

A)the sale of goods.
B)the sale of services.
C)the rental of property.
D)investments.
E)donations.

Question 54

Which of the following equations describes the information presented in an income statement?

A)Equity = liabilities - assets
B)Equity = assets - liabilities
C)Net income = expenses - revenues + taxes
D)Revenues - expenses = net income
E)Costs of goods sold = beginning inventory + interim purchases - ending inventory

Question 55

_____,an expense account shown on income statements,include sales salaries.

A)Interest expenses
B)Selling expenses
C)General and administrative expenses
D)Research and development expenses
E)Depreciation expenses

Question 56

The _____ is an accumulation of all financial transactions conducted by an organization since its founding.

A)statement of retained earnings
B)balance sheet
C)profit and loss statement
D)statement of cash flow
E)income tax form

Question 57

In the context of expense accounts,salaries of executives and their staff are included under the category of:

A)interest expenses.
B)retained expenses.
C)general and administrative expenses.
D)research and development expenses.
E)depreciation expenses.

Question 58

The financial document that presents a "snapshot" of an organization's financial position at a given moment is called a(n):

A)income statement.
B)balance sheet.
C)annual report.
D)budget.
E)statement of cash flow.

Question 59

Companies record their _____ in the revenue and expense accounts during an accounting period.

A)operational activities
B)managerial activities
C)administrative activities
D)research activities
E)developmental activities

Question 60

Which of the following statements is true of the balance sheet?

A)It represents the result of transactions completed over a specified accounting period.
B)It represents all transactions conducted by an organization since its founding.
C)It represents an organization's profitability over a period of time.
D)It represents the overall revenues of an organization.
E)It represents how the company's cash changed during an accounting period.

Question 61

Which of the following is an asset in the balance sheet?

A)Accrued expenses
B)Accounts payable
C)Accounts receivable
D)Taxes payable
E)Wages payable

Question 62

_____,a category of cash flow,is calculated from changes in the long-term or fixed asset accounts.

A)Cash from profiteering activities
B)Cash from investing activities
C)Cash from financing activities
D)Cash from operating activities
E)Cash from marketing activities

Question 63

Which of the following equations is correct?

A)Profit margin = net income/sales
B)Profit margin = assets + liabilities
C)Profit margin = revenue - expenses
D)Profit margin = net income/total assets
E)Profit margin = net income/stockholder's equity

Question 64

_____ brings the complex information from a company's income statement and balance sheet into sharper focus.

A)General analysis
B)Specific analysis
C)Cash-flow analysis
D)Feedback analysis
E)Ratio analysis

Question 65

The financial statement that explains how a firm's cash changed from the beginning of the accounting period to the end is called the:

A)statement of cash flows.
B)balance sheet.
C)income statement.
D)master budget.
E)profit-loss statement.

Question 66

A company's assets that are used or converted into cash within the course of a calendar year are called:

A)fixed assets.
B)long-term assets.
C)equity.
D)current assets.
E)current liabilities.

Question 67

_____,a category of cash flow,is calculated from changes in the long-term liability accounts and the contributed capital accounts in owners' equity.

A)Cash from profiteering activities
B)Cash from investing activities
C)Cash from financing activities
D)Cash from operating activities
E)Cash from marketing activities

Question 68

Which of the following categories of cash flow includes all the accounts on the balance sheet that relate to computing revenues and expenses for the accounting period?

A)Cash from investing activities
B)Cash from operating activities
C)Cash from marketing activities
D)Cash from financing activities
E)Cash from profiteering activities

Question 69

A company with a low return on assets:

A)is making profits.
B)does not have debts.
C)is not using its assets very productively.
D)is lending its assets to other companies.
E)does invest money in its assets.

Question 70

One of the ways to analyze a company's financial performance is to compare its performance with those of:

A)the foreign governments.
B)the manufacturers producing their products.
C)the companies in the same industry.
D)the U.S.government.
E)the suppliers of the raw materials.

Question 71

Which of the following calculations helps managers compare an organization's productivity,profitability,and financing mix with other similar entities?

A)Feedback analysis
B)Ratio analysis
C)Specific analysis
D)General analysis
E)

Question 72

Return on assets and return on equity are examples of _____.

A)asset utilization ratios
B)liquidity ratios
C)debt ratios
D)profitability ratios
E)current ratios

Question 73

_____,a category of cash flow,is calculated by combining the changes in the revenue accounts,expense accounts,current asset accounts,and current liability accounts.

A)Cash from profiteering activities
B)Cash from bookkeeping activities
C)Cash from financing activities
D)Cash from operating activities
E)Cash from marketing activities

Question 74

Each type of stock issued by a company represents a different claim on the organization,thus each must be represented by a separate owners' equity account called _____.

A)deferred revenue
B)contributed capital
C)insurance revenue
D)accounts payable
E)accrued taxes

Question 75

_____ includes the owners' contributions to a company along with income earned by the company and retained to finance continued growth and product development.

A)Owners' equity
B)Owners' assets
C)Owners' liabilities
D)Revenue
E)Profits

Question 76

Profitability ratios measure:

A)how efficiently a firm uses its assets to generate sales.
B)how much debt the firm is using relative to other sources of financing.
C)how much operating income or net income a firm is able to generate relative to its assets,equity,and sales.
D)the speed with which a company can turn its short-term assets into cash to pay off its short-term debts.
E)the performance of the firm relative to others on a per-share basis.

Question 77

A company's financial obligations to short-term creditors,which must be repaid within one year,are called its:

A)current assets.
B)equity.
C)net profit.
D)current liabilities.
E)accounts payable.

Question 78

An account that represents all unpaid financial obligations incurred by an organization is called:

A)current assets.
B)accounts payable.
C)cost of goods sold.
D)accrued expenses.
E)long-term liabilities.

Question 79

_____ refer to calculations that measure an organization's financial health.

A)General analysis
B)Specific analysis
C)Ratio analysis
D)Feedback analysis
E)

Question 80

Which of the following is a liability in a balance sheet?

A)Accounts receivable
B)Cash
C)Inventory
D)Current assets
E)Accounts payable