Question 1

The statement of cash flows,like the income statement,reports only operating activities of a company.

Accepted Answer

The statement of cash flows reports the cash inflows and outflows from operating, investing, and financing activities of a company.

Question 2

____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information

Accepted Answer

The answer of ____________________ is the magnitude of an omission...

Question 3

A 12% change in sales will result in a 12% change in net income.

Accepted Answer

The relationship between sales and net income is not always proportional. It depends on various factors such as expenses, taxes, and other financial considerations. Therefore, a 12% change in sales may not necessarily result in a 12% change in net income.

Question 4

Funds raised from financing activities should be invested in assets that can be used to carry on business operations.

Accepted Answer

Funds raised from financing activities (such as issuing new shares or taking on debt) are typically used to invest in assets that can help the company grow and carry on its business operations, such as purchasing new equipment, expanding facilities, or investing in research and development. This is in contrast to funds raised from operating activities, which are used to cover the day-to-day expenses of running the business.

Question 5

____________________ is the quality of accounting information that allows a user to compare two or more accounting periods for a single company.

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Question 6

The primary responsibility for the preparation and integrity of the financial statements in an annual report belongs to the company's independent accountants (CPAs).

Accepted Answer

While independent accountants (CPAs) are responsible for auditing and providing an opinion on the financial statements, the primary responsibility for the preparation and integrity of the financial statements belongs to the company's management.

Question 7

____________________ is the quality of accounting information that makes it dependable in representing the events that it purports to represent

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Question 8

Investing activities are needed to provide the funds to start a business.

Accepted Answer

The answer of Investing activities are needed to provide the...

Question 9

Some analysts properly refer to a company's profit margin as its return on assets.

Accepted Answer

Profit margin is not the same as return on assets. Profit margin measures the amount of profit a company makes for every dollar of revenue it generates, while return on assets measures how efficiently a company's assets are being used to generate profits.

Question 10

Independent auditors (CPAs)render an opinion that the financial statements do or do not fairly present a company's financial position,operating results,and cash flows.

Accepted Answer

This is a true statement. Independent auditors, who are certified public accountants (CPAs), provide an opinion on the financial statements of a company. They evaluate the financial statements and issue a report stating whether they believe the financial statements present a true and fair view of the company's financial position, operating results, and cash flows in accordance with the applicable accounting standards.

Question 11

____________________ have claims to an entity's economic resources

Accepted Answer

The answer of ____________________ have claims to an entity's economic...

Question 12

____________________ is the capacity of information to make a difference in a decision

Accepted Answer

The answer of ____________________ is the capacity of information to...

Question 13

In the independent auditors' report included with the annual report,management discusses the financial statements and provides the shareholders with explanations for certain amounts reported in the statements.

Accepted Answer

The independent auditors' report includes the auditor's opinion on the fairness of the financial statements and does not include management's explanations for certain amounts reported. Management's discussion and analysis is typically included in a separate section of the annual report.

Question 14

____________________ and ____________________ have claims to an entity's economic resources.

Accepted Answer

The answer of ____________________ and ____________________ have claims to an...

Question 15

____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Question 16

Dividends declared and paid reduce a company's retained earnings balance.

Accepted Answer

When a company declares and pays dividends, it uses some of its profits to distribute money to shareholders. This reduces the amount of money that the company retains for its own use and therefore decreases the retained earnings balance.

Question 17

An independent auditor's (CPA's)report is a guarantee that the financial statements are free from fraud or material error

Accepted Answer

An independent auditor's (CPA's) report provides reasonable assurance that the financial statements are free from material misstatement due to errors or fraud, but it does not provide a guarantee that they are completely free from such issues.

Question 18

Dividends paid appears on both the income statement and the statement of retained earnings.

Accepted Answer

Dividends paid do not appear on the income statement; they are deducted from retained earnings and appear on the statement of retained earnings. The income statement records revenues and expenses, not distributions to shareholders.

Question 19

____________________ is the quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences

Accepted Answer

The answer of ____________________ is the quality of accounting information...

Question 20

____________________ is the practice of using the least optimistic estimate when two estimates of amounts are about equally likely

Accepted Answer

The answer of ____________________ is the practice of using the...

Quiz 2: Financial Statements and the Annual Report

The statement of cash flows,like the income statement,reports only operating activities of a company.

____________________ is the magnitude of an omission or misstatement in accounting information that will affect the judgment of someone relying on the information

A 12% change in sales will result in a 12% change in net income.

Funds raised from financing activities should be invested in assets that can be used to carry on business operations.

____________________ is the quality of accounting information that allows a user to compare two or more accounting periods for a single company.

The primary responsibility for the preparation and integrity of the financial statements in an annual report belongs to the company's independent accountants (CPAs).

____________________ is the quality of accounting information that makes it dependable in representing the events that it purports to represent

Investing activities are needed to provide the funds to start a business.

Some analysts properly refer to a company's profit margin as its return on assets.

Independent auditors (CPAs)render an opinion that the financial statements do or do not fairly present a company's financial position,operating results,and cash flows.

____________________ have claims to an entity's economic resources

____________________ is the capacity of information to make a difference in a decision

In the independent auditors' report included with the annual report,management discusses the financial statements and provides the shareholders with explanations for certain amounts reported in the statements.

and have claims to an entity's economic resources.

____________________ is the quality of accounting information that makes it comprehensible to those willing to spend the necessary time

Dividends declared and paid reduce a company's retained earnings balance.

An independent auditor's (CPA's)report is a guarantee that the financial statements are free from fraud or material error

Dividends paid appears on both the income statement and the statement of retained earnings.

____________________ is the quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences

____________________ is the practice of using the least optimistic estimate when two estimates of amounts are about equally likely