Question 1

If a firm's assets equal $6,000 and its liabilities equal $3,500, then owners' equity is _____.
A) $9,500
B) $4,750
C) $2,500
D) ­$2,500

Accepted Answer

Owners' equity is calculated as assets minus liabilities. Therefore, $6,000 (assets) - $3,500 (liabilities) = $2,500 (owners' equity).

Question 2

Which of the following statements is true of management accountants?
A) They work with multiple clients on a fee basis.
B) They are employed as part of an organization.
C) They provide accounting information exclusively to the government.
D) They ensure that the government meets accounting regulations.

Accepted Answer

Management accountants are employed as part of an organization and work to provide accounting information and analysis to help managers make decisions. They are not typically fee-based and do not work exclusively with the government or in ensuring government compliance.

Question 3

Priya was recently hired by RLM Inc. In her role as an accountant, she prepares reports and analyzes financial information related to the company. In this case, Priya is an example of a _____ accountant.
A) government
B) forensic
C) management
D) public

Accepted Answer

Priya's role involves preparing reports and analyzing financial information for the company, which is characteristic of a management accountant. Management accountants work within an organization to provide financial information and analysis to support decision-making and strategy development. Government accountants work for government agencies or departments, forensic accountants investigate financial crimes, and public accountants work for public accounting firms providing services such as auditing, tax preparation, and consulting.

Question 4

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

Accepted Answer

Yvonne's job responsibilities align with those of internal auditors who are responsible for identifying and evaluating an organization's risk management, control, and governance processes. Management consultants, government accountants, and certified public accountants may have different job responsibilities and areas of expertise.

Question 5

The Financial Accounting Standards Board (FASB) establishes the _____ used in the practice of financial accounting.
A) yearly budgeting rules and principles
B) financial auditing methods and principles
C) generally accepted accounting principles
D) intra­organizational accounting principles

Accepted Answer

FASB establishes the generally accepted accounting principles (GAAP) used in the practice of financial accounting.

Question 6

The _____ summarizes a firm's financial position at a specific point in time by listing its assets, liabilities, and owners' equity.
A) statement of cash flows
B) income statement
C) balance sheet
D) budgeted balance statement

Accepted Answer

The balance sheet is the statement that summarizes a firm's financial position at a specific point in time by listing its assets, liabilities, and owners' equity. The statement of cash flows shows the inflows and outflows of cash during a period of time, the income statement shows a firm's revenues and expenses over a period of time, and the budgeted balance statement is not a commonly used financial statement.

Question 7

The accounting equation is _____.
A) Assets = Liabilities ­ Owner's Equity
B) Liabilities = Assets + Revenue
C) Assets = Liabilities + Owner's Equity
D) Assets = Liabilities + Net Income

Accepted Answer

The accounting equation is Assets = Liabilities + Owner's Equity. This equation must always balance, meaning that the total assets must equal the total of liabilities and equity.

Question 8

Which of the following statements is true of the FASB?
A) Its authority comes from the Internal Revenue Service.
B) It consists of seven members appointed by the Financial Accounting Foundation.
C) Its members cannot be reappointed to serve additional terms.
D) Its members can retain ties with firms in which they were previously employed.

Accepted Answer

The Financial Accounting Standards Board (FASB) consists of seven members who are appointed by the Financial Accounting Foundation, and their authority comes from the Securities and Exchange Commission (SEC). Members can be reappointed to serve additional terms, and they are required to sever all ties with firms in which they were previously employed to ensure independence and objectivity in their decision-making.

Question 9

_____ accountants work for local, state, and federal agencies to ensure that tax revenues are updated in accordance with regulations.
A) Forensic
B) Public
C) Management
D) Government

Accepted Answer

Government accountants are responsible for ensuring that taxes are updated in compliance with regulations on behalf of local, state, and federal agencies.

Question 10

Shelly is a loan officer who approves loans for small businesses. One factor she looks at carefully when making loan decisions is the amount of outstanding debt the firm already has. She can find this information by looking at the firm's:
A) income statement.
B) balance sheet.
C) articles of incorporation.
D) cash budget.

Accepted Answer

The amount of outstanding debt a firm has is typically listed on its balance sheet. The income statement shows revenue and expenses, but not necessarily the firm's current level of debt. Similarly, the articles of incorporation and cash budget are unlikely to provide information on outstanding debt.

Question 11

In the United States, the SEC has delegated the responsibility for developing accounting standards to a private organization called the .
A) FAF
B) FASB
C) IRS
D) IASB

Accepted Answer

The Financial Accounting Standards Board (FASB) is the private organization delegated by the SEC to develop accounting standards in the United States. The Financial Accounting Foundation (FAF) is the parent organization of the FASB, but it is not responsible for developing accounting standards. The Internal Revenue Service (IRS) is responsible for enforcing tax laws, but not for developing accounting standards. The International Accounting Standards Board (IASB) is responsible for developing international accounting standards, but not necessarily for the United States.

Question 12

Generally accepted accounting principles (GAAP) is a set of accounting standards that is used in the:
A) preparation of financial statements.
B) preparation of a company's tax returns.
C) audit of a company's financial books.
D) preparation of organizational budgets.

Accepted Answer

Generally accepted accounting principles (GAAP) is a set of accounting standards used in the preparation of financial statements. GAAP ensures the consistency, comparability, and accuracy of financial information provided to stakeholders. GAAP does not govern the preparation of company tax returns, audit of financial books, or the preparation of organizational budgets.

Question 13

The Food and Drug Administration (FDA) has submitted its accounting information to Tamara, who works for the SEC. She will make sure that its reports are filed as per the Securities and Exchange Commission reporting requirements. In this case, Tamara works for _____.
A) a cybermediary
B) the government
C) a creditor
D) a stockholder

Accepted Answer

Tamara works for the government agency called the Securities and Exchange Commission (SEC) which is responsible for enforcing federal securities laws and regulating the securities industry. The FDA is required to file reports with the SEC, and Tamara's job is to ensure that the reports comply with the SEC's reporting requirements. Therefore, Tamara works for the government, not a cybermediary, creditor, or stockholder.

Question 14

The major responsibilities of financial accounting is the preparation of the:
A) balance sheet, income statement, and statement of cash flows.
B) journal ledger, cash budget, and company bylaws.
C) articles of incorporation, auditor's opinion, and master budget.
D) management accounting practices, social audit, and journal ledger.

Accepted Answer

Financial accounting is primarily concerned with the preparation of financial statements that provide information about a company's financial performance, financial position, and cash flows. The balance sheet, income statement, and statement of cash flows are the three most important financial statements that are typically prepared by financial accountants. The journal ledger and cash budget are also important accounting records, but they are not financial statements. The articles of incorporation, auditor's opinion, and master budget are not prepared by financial accountants, but may be prepared by other professionals such as lawyers, auditors, or management accountants. The social audit is a separate process that involves assessing a company's social and environmental impact.

Question 15

Jane has completed 150 semester hours of college and has passed a rigorous two­day, four­part accounting exam. She also has a year's experience of working as an assistant accountant for a fashion company. She provides management consultancy for multiple organizations on a fee basis. Given her qualifications and experience, Jane is a certified _____ accountant.
A) fraud
B) public
C) forensic
D) government

Accepted Answer

Based on the information provided, Jane is a certified public accountant (CPA). She has completed the required college semester hours, passed the accounting exam, and has experience working as an assistant accountant. Jane also provides consultancy services for multiple organizations, which is a common practice for CPAs in public accounting firms. While fraud, forensic, and government accounting are all valid specializations within the accounting profession, the information provided does not suggest that Jane is specifically certified in any of these areas.

Question 16

Ultimate legal authority to set and enforce accounting standards lies with the _____.
A) SEC
B) IRS
C) FDA
D) CFTC

Accepted Answer

The Securities and Exchange Commission (SEC) has the ultimate authority to set and enforce accounting standards for publicly traded companies in the United States. The IRS (Internal Revenue Service) is responsible for enforcing tax laws, the FDA (Food and Drug Administration) oversees food and drug safety, and the CFTC (Commodity Futures Trading Commission) regulates the futures and options markets.

Question 17

The _____ is tasked with making U.S. accounting practices more consistent with those in other nations.
A) GAAP
B) DOT
C) FAF
D) FASB

Accepted Answer

The answer of The _____ is tasked with making U.S....

Question 18

The balance sheet of Rover's Inc. shows its liabilities and owners' equity as $130,000 and $170,000 respectively. In this case, Rover's _____.
A) total assets are $300,000
B) total income is $40,000
C) net income for the current year is $300,000
D) net cash flow for the current year is $40,000

Accepted Answer

The total assets of Rover's Inc. can be calculated as Assets = Liabilities + Owners' Equity, which in this case would be $130,000 + $170,000 = $300,000.

Question 19

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

Accepted Answer

Financial accounting is concerned with providing financial statements and reports to external stakeholders. These reports include income statements, balance sheets, and cash flow statements that show the financial performance and position of the company to investors, creditors, and government regulators. Forensic accounting is used for investigation and litigation purposes, while managerial accounting is focused on the needs of internal stakeholders like managers and employees.

Question 20

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

Accepted Answer

Sally's duties suggest that she is a management accountant, as she is responsible for analyzing and appraising the company's financial performance and internal records for the purpose of supporting management decision-making. Forensic accountants typically investigate and analyze financial situations in the context of legal disputes, while government auditors focus on ensuring compliance with government regulations. Certified fraud examiners specialize in detecting, preventing, and investigating fraud.

Quiz 8: Accounting: Decision Making by the Numbers

If a firm's assets equal $6,000 and its liabilities equal $3,500, then owners' equity is _____.

Which of the following statements is true of management accountants?

Priya was recently hired by RLM Inc. In her role as an accountant, she prepares reports and analyzes financial information related to the company. In this case, Priya is an example of a _____ accountant.

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

The Financial Accounting Standards Board (FASB) establishes the _____ used in the practice of financial accounting.

The _____ summarizes a firm's financial position at a specific point in time by listing its assets, liabilities, and owners' equity.

The accounting equation is _____.

Which of the following statements is true of the FASB?

_____ accountants work for local, state, and federal agencies to ensure that tax revenues are updated in accordance with regulations.

Shelly is a loan officer who approves loans for small businesses. One factor she looks at carefully when making loan decisions is the amount of outstanding debt the firm already has. She can find this information by looking at the firm's:

In the United States, the SEC has delegated the responsibility for developing accounting standards to a private organization called the .

Generally accepted accounting principles (GAAP) is a set of accounting standards that is used in the:

The Food and Drug Administration (FDA) has submitted its accounting information to Tamara, who works for the SEC. She will make sure that its reports are filed as per the Securities and Exchange Commission reporting requirements. In this case, Tamara works for _____.

The major responsibilities of financial accounting is the preparation of the:

Ultimate legal authority to set and enforce accounting standards lies with the _____.

The _____ is tasked with making U.S. accounting practices more consistent with those in other nations.

The balance sheet of Rover's Inc. shows its liabilities and owners' equity as $130,000 and $170,000 respectively. In this case, Rover's _____.

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

Sally is an employee of EcoTrans Inc. Her duties include preparing reports and analyzing company accounting data. She also appraises financial performances, verifies the accuracy and validity of the company's internal records and accounting procedures. Sally's role is that of a _____.