Question 1

The __________ is a six-step procedure that results in the preparation and analysis of the major financial statements.

Accepted Answer

The six-step procedure mentioned in the question is the accounting cycle. The other options listed are not an accurate description of the process mentioned.

Question 2

A bookkeeper's first task is to:

Accepted Answer

The first task of a bookkeeper is to organize and separate all of the firm's transactions into meaningful categories, such as revenue, expenses, assets, and liabilities. This is a crucial step in the bookkeeping process as it lays the foundation for preparing financial statements and analyzing the firm's financial performance.

Question 3

In spite of his assertions that he carried-out fraud alone,convicted investment advisor Bernard Madoff's independent auditor is now under investigation.The auditor is accused of not doing his job.Rather than verify Madoff's company records,the F.B.I claims that he "rubber-stamped" the records.Knowing what you have learned about the importance of auditing,which of the following statements do you understand to be most accurate?

Accepted Answer

The article mentions that the independent auditor did not do his job and simply "rubber-stamped" the records of Madoff's company. This indicates a lack of adherence to strict auditing rules, which are mandated by the Sarbanes-Oxley Act. Therefore, C is the most accurate statement. A, B and D are all incorrect as they are not supported by the information given in the article.

Question 4

A basic difference between managerial accounting and financial accounting is that managerial accounting:

Accepted Answer

Managerial accounting provides information for internal use, such as making decisions about operations, while financial accounting is focused on providing information for external parties, such as investors and creditors, to make decisions about investing or lending to the company.

Question 5

As a first step in the accounting cycle,_________ involves the recording of business transactions.

Accepted Answer

Bookkeeping is the first step in the accounting cycle and involves the recording of business transactions. Marketing and economics are not part of the accounting cycle, and auditing comes later in the cycle.

Question 6

Kelley's Kloset,LLC has applied for a business loan.Her prospective banker has requested information concerning the financial condition of her business.Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Accepted Answer

Financial accounting is responsible for providing financial statements and other accounting information to external parties such as bankers, investors, and regulators. Management accounting, on the other hand, is focused on providing financial information for internal decision-making purposes. Tax accounting is specifically geared towards ensuring compliance with tax laws and regulations, and certified bookkeeping refers to individuals who have completed a professional certification program demonstrating their proficiency in bookkeeping tasks.

Question 7

__________ is the accounting practice of recording each transaction in two places in the accounting journal.

Accepted Answer

Double-entry bookkeeping is the accounting practice of recording each transaction in two places in the accounting journal. This is essential because it ensures that accounts are accurately balanced and any errors can be quickly identified and resolved. The other options are not related to this practice.

Question 8

Stockholders of the Sasha Deal Company are concerned about irregularities in the firm's accounting system.One approach to identify problems in the records of the company would be to have an)________ performed.

Accepted Answer

An independent audit would be the best choice as it involves a third-party auditor who is not affiliated with the company and can provide an objective assessment of the financial records. Internal audits are conducted by employees of the company and may not be as impartial, while unofficial audits have no official standing and may not carry as much weight in identifying any irregularities. GAAP analysis, while important, focuses on ensuring that the company's accounting practices are in compliance with generally accepted accounting principles, but may not necessarily identify any specific irregularities in the records.

Question 9

A _________ summarizes all the data from the account ledgers to verify that they are correct and balanced.

Accepted Answer

A trial balance summarizes all the data from the account ledgers and ensures that the debits and credits are equal and balanced, indicating that the ledger accounts are correct. A ledger statement is not a commonly used term in accounting, a balance sheet provides a snapshot of a company's financial position at a specific point in time, and a statement of cash flows reports on a company's cash inflows and outflows during a period of time.

Question 10

Taylor Casual,a chain of retail clothing stores,wants to assure investors and other outsiders that its financial statements are accurate.One way to do so would be to hire a public accounting firm to:

Accepted Answer

The best choice would be for Taylor Casual to hire a public accounting firm to perform an independent audit. An independent audit provides an objective evaluation of the company's financial statements, giving investors and outsiders assurance that the statements are accurate and reliable. This is considered an industry standard for companies to provide transparency and gain the trust of stakeholders.

Question 11

In the Legal Briefcase box discussion about accounting fraud,it was concluded that:

Accepted Answer

The Legal Briefcase box discussion states that despite new regulations, forensic accountants are still reporting a rise in fraudulent acts such as inflating revenues. This indicates that accounting fraud remains a prevalent issue and the need for forensic accountants is still present.

Question 12

CPA Experts,Inc. ,a well-known public accounting firm has enjoyed a long-standing relationship with one of its clients,Generation Technologies,Inc.Recently,at a company-wide gala,the CEO of Generation Technologies announced that CPA Experts has performed the firm's independent audits for the past ten years,and he is looking forward to exploring other services that CPA Experts has to offer,including financial consulting."After all," he exclaims,"A recent magazine article called CPA Experts the 'profitability geniuses '!" As a senior accountant for Generation Technologies,how do you advise your CEO?

Accepted Answer

Sarbanes-Oxley rulings state that public accounting firms cannot perform both auditing and consulting services for the same client. Therefore, it would not be possible for CPA Experts to provide financial consulting services to Generation Technologies while also performing their independent audits.

Question 13

Which of the following agencies would have the greatest impact on the methods used to record,classify,summarize,and interpret accounting information for the State of Kentucky's Department of Transportation?

Accepted Answer

The Government Accounting Standards Board (GASB) is the primary standard-setting organization for state and local government entities, including the Department of Transportation for the state of Kentucky. GASB sets the accounting and financial reporting standards which impact how accounting information is recorded, classified, summarized, and interpreted. The other agencies listed, while important, do not have primary responsibility for setting accounting standards for state and local government entities.

Question 14

Becky Hunter is an accountant employed by FAF Enterprises.Recently she has spent much of her time working on defining measures of costs for the production department and checking to ensure that various departments are staying within their budgets.Becky is a:

Accepted Answer

Becky Hunter's work is mainly concerned with managerial accounting as she is involved in defining measures of costs for the production department and checking budgets. Additionally, the fact that she is employed by FAF Enterprises suggests that she is not a public accountant, but rather a private accountant who works within the organization.

Question 15

The accounting book or computer program where each day's transactions are first recorded is called a:

Accepted Answer

The book or computer program where each day's transactions are first recorded is called a journal. Choice A, posting workbook, is not a commonly used term in accounting. Choice B, general ledger, is where all journal entries are eventually posted and summarized. Choice C, balance sheet, is a financial statement that reports a company's assets, liabilities, and equity at a specific point in time, and is not directly related to the daily recording of transactions.

Question 16

A __________ is a specialized accounting book,where transactions are categorized according to type.For example,all utility transactions are recorded in the same category.

Accepted Answer

A ledger is a specialized accounting book where transactions are categorized according to type, such as all utility transactions being recorded in the same category. A journal is a book of original entry where transactions are recorded before being transferred to the ledger. A trial balance is a list of all the accounts and their balances to ensure that debits and credits are equal. A balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time.

Question 17

As U.S.firms focus on cost cutting in order to stay competitive with producers in low-wage countries,they will rely on __________ to create strategies to help reduce costs.

Accepted Answer

Managerial accountants are trained to help firms reduce costs through various techniques such as analyzing production processes, identifying inefficiencies, and implementing cost-saving measures. Financial accountants focus on reporting and analyzing financial information for external stakeholders, whereas government accountants and auditors have different roles and responsibilities within the accounting profession.

Question 18

In the course of their jobs,bookkeepers:

Accepted Answer

Bookkeepers are responsible for recording all of a company's financial transactions. They keep track of accounts payable and accounts receivable, record invoices and receipts, and ensure that all financial records are accurate and up-to-date. While they may assist with interpreting accounting data and preparing financial statements, those responsibilities are typically handled by accountants or financial analysts. Bookkeepers do not typically have the authority to approve major expenditures.

Question 19

While reviewing the books at his firm,Chad Cooper noticed discrepancies between how the firm recorded revenues last year and how it elected to record revenues during the recent quarter of the current year.As a recent business graduate,Chad felt confident that the changes needed clarification.To get another opinion,Chad suggested to the company's controller that the firm solicit _______________.

Accepted Answer

The best choice would be to solicit the services of an independent auditor as they are trained to provide an objective and unbiased opinion on financial statements and can help to identify any discrepancies or irregularities in accounting practices. The Government Accounting Standards Board, senior executive at the IRS, or a certified internal auditor may not have the necessary expertise to adequately address the issue at hand.

Question 20

The purpose of a trial balance is to:

Accepted Answer

The purpose of a trial balance is to ensure that the figures in the account ledgers are correct and balanced. This is done by adding up all of the debit balances and all of the credit balances in the ledger accounts and making sure that the two totals are equal.

Quiz 17: Understanding Accounting and Financial Information