question

Accounting is a system for recognizing, recording, organizing, analyzing, summarizing, and reporting information about the financial transactions that affect an organization.

answer

True

question

A variety of business stakeholders rely so heavily on accounting information that it's sometimes called the "backbone" of business.

answer

False

question

The accounting profession is seldom concerned with the interpretation of financial information.

answer

False

question

Recording financial transactions is an accounting function.

answer

True

question

As an employee of Boca Bowling, you have no need to review or understand the company's accounting information.

answer

False

question

The managers of a company are the only stakeholders of a company that have a legitimate interest in its accounting information.

answer

False

question

Some key users of a corporation's accounting information include managers, government agencies, and stockholders.

answer

True

question

Accounting systems are utilized by companies for several reasons, but they have little value when it comes to making economic decisions.

answer

False

question

Mary is an employee and stockholder for the McNeely Company. Mary is considered a primary user of her firm's accounting information.

answer

True

question

Public accountants provide a variety of accounting services for clients on a fee basis.

answer

True

question

Management accountants and public accountants do the same type of work but have different qualifications.

answer

False

question

Management accountants work for private citizens who are not part of a firm, while public accountants work internally for publicly traded companies.

answer

False

question

Management, internal, and government accountants are business titles used by certified public accountants.

answer

False

question

Management accountants work within a business organization, preparing reports and analyzing financial information for the company that employs them.

answer

True

question

Internal auditors are also known as certified public accountants.

answer

False

question

Through additional preparation, an accountant may become a certified management accountant (CMA), certified public accountant (CPA), and/or certified internal auditor. These certifications signify advanced preparation in the accounting field.

answer

True

question

Internal auditors are private accountants responsible for verifying their company's internal accounting procedures.

answer

True

question

Most accountants become CPAs because the preparation to become a CMA is much more rigorous.

answer

False

question

Financial accounting is the branch of accounting that prepares financial statements for use by external stakeholders such as owners, creditors, suppliers, and other stakeholders.

answer

True

question

The Financial Accounting Standards Board (FASB) is the private, self-regulating board established to develop and enforce the generally accepted accounting principles that guide the practice of financial accounting.

answer

True

question

FASB is an acronym that stands for Federal Accounting Systems Board.

answer

False

question

Generally accepted accounting principles (GAAP) are a set of accounting standards used in the preparation of financial statements.

answer

True

question

The rules governing the practice of financial accounting are established and enforced by the Federal Accounting Standards Commission (FASC).

answer

False

question

GAAP is the policy board that establishes the rules known as the FASB of accounting.

answer

False

question

The purpose of GAAP is to specify the procedures used in managerial accounting to prepare budgets and cost reports.

answer

False

question

Two of the goals underlying GAAP are to ensure that the statements prepared by financial accountants are relevant and to ensure that they are consistent.

answer

True

question

FASB responsibility for enforcing accounting standards only extends to the U.S. and does not include working with other nations.

answer

False

question

The FASB and IASB are working together to reduce confusion and provide external stakeholders with accurate and consistent financial statements worldwide.

answer

True

question

Since it deals strictly with numbers, the practice of accounting is free from ethical considerations.

answer

False

question

As a result of the accounting scandals of the early 21st century, many states have imposed new ethics-related requirements on certified public accountants.

answer

True

question

Assets = Liabilities + Net Income

answer

False

question

Ralph owns some stock in the Lottadoe Corporation, and wants to know whether this company earned a profit over the most recent year. This information would be available in the company's balance sheet.

answer

False

question

The Taylix Company's balance sheet showed $18,000,000 in assets and $10,000,000 in liabilities. Taylix Company's owner's equity = $6,000,000.

answer

False

question

A balance sheet is a financial statement reporting the financial position of a firm at a particular point in time by identifying and reporting the value of the firm's assets, liabilities, and owners' equity

answer

True

question

Bernie is calling his accountant to determine how much he owes his supplier of raw materials by the end of the month. Bernard should ask the accountant to provide him with a balance sheet.

answer

True

question

According to the accounting equation, Assets - Expenses = Net Income

answer

False

question

Bernard's business checking account seems to be short on cash. He is calling his accountant to determine if he was profitable last month. The income statement is his best source of information concerning his cash position.

answer

False

question

Assets are the tangible and intangible resources of value owned by a firm.

answer

True

question

Expenses are listed on the asset side of a balance sheet.

answer

False

question

Rosalyn owns stock in Munnymacher Inc. and just received her annual report from this company. If she wants to see the total value of Munnymacher's assets, she should look at the company's balance sheet.

answer

True

question

Current liabilities are debts that will come due within a year of the date on the balance sheet.

answer

True

question

The owners' equity section of the balance sheet indicates the claims a firm's owners have against their company's assets.

answer

True

question

Liabilities could include bank loans and current payments owed to suppliers.

answer

True

question

Balance sheets reflect three accounts: assets, liabilities, and cost of goods sold account.

answer

False

question

The accounting equation is based on the fact that the value of a firm's assets is, by definition, exactly equal to the financing provided by creditors and by owners of the firm.

answer

True

question

A company's balance sheet will "balance" even if it is on the verge of bankruptcy.

answer

True

question

An income statement is the financial statement that reports revenues, expenses, and net income resulting from a firm's operations, over a given period of time.

answer

True

question

Net income is the difference between the revenue a firm earns and the expenses it incurs in a given time period.

answer

True

question

The accounting entity approach is an accounting method that recognizes revenue when it is earned and matches expenses to the revenues they helped produce.

answer

False

question

A college student registers for classes and pays the tuition with a credit card. Because it uses accrual-basis accounting, the college will recognize the payment as revenue as soon as the transaction turns into cash in the school's bank account.

answer

False

question

Business expenses are available resources that stakeholders control.

answer

False

question

Accrual-basis accounting is the method that recognizes revenue when it is earned and matches expenses to those revenues they helped produce.

answer

True

question

Revenues represent increases in the amount of cash and other assets such as accounts receivable resulting from the sale of goods, the provision of services, or other activities intended to earn income.

answer

True

question

The statement of cash flows shows the cash flowing in and out of the firm from three types of activities: operations, investing, and financing.

answer

True

question

A statement of cash flows is the financial statement identifying a firm's sources and uses of cash in a given accounting period.

answer

True

question

Revenue, expenses, and net income are the key sections found on a statement of cash flows.

answer

False

question

The cash flows received from operations reported in the statement of cash flows should be exactly equal to the revenue the firm reports on its income statement.

answer

False

question

The cash balance reported at the bottom of the statement of cash flows should equal the amount of cash reported for a balance sheet prepared at the end of the same accounting period.

answer

True

question

The statement of retained earnings shows how retained earnings have changed from one accounting period to the next. By subtracting dividends paid to shareholders from net income, managers will see changes in this statement over time.

answer

True

question

U.S. securities laws require every private company in the United States to have an independent CPA firm perform an annual external audit of its financial statements.

answer

False

question

When an external audit doesn't uncover any problems with the firm's financial methods and statements, the auditor will issue an unqualified opinion.

answer

True

question

The Sarbanes-Oxley Act of 2002 included provisions designed to improve external auditing procedures and enhance financial reporting for publicly traded firms.

answer

True

question

Bryan's company is going through its annual external audit. Since Bryan's job is to catalog and store the company's supply inventory he needs to make sure his inventory records are accurate, so the company will receive an unqualified opinion from the auditor.

answer

True

question

An unqualified opinion and a clean opinion are the same thing.

answer

True

question

Publicly traded firms may disclose additional information about the firm's operations in notes to the financial statements in the annual report.

answer

True

question

The SEC requires publicly traded corporations to provide comparative financial statements.

answer

True

question

Horizontal analysis is an analysis of information in financial statements that involves expressing various accounts as a percentage of some base amount.

answer

False

question

Horizontal analysis compares the balance sheet in a given year to the income statement and statement of cash flows in that same year to ensure that these three statements contain consistent information.

answer

False

question

Aaron and Abbey are evaluating three different telecommunications companies in order to determine which one is the best investment. Horizontal analysis will allow them to make comparisons over several years, in order to determine which company(s) has successfully grown its profits.

answer

True

question

Managerial accounting involves developing standardized reports according to a predetermined schedule.

answer

False

question

The CFO of Hawking Bros. Production asked accountant Artie Anderson to prepare a customized report dealing with cost overruns at the company's production facility in Florida. Artie is a managerial accountant.

answer

True

question

Managerial accounting is the branch of accounting that provides reports and analysis to managers in order to help those managers make informed business decisions.

answer

True

question

Cost is defined as the value of what is given up in exchange for something else.

answer

True

question

Explicit, implicit, fixed, and variable are all forms of cost concepts commonly used by managerial accountants.

answer

True

question

What a person pays out-of-pocket is often referred to as an implicit costs.

answer

False

question

Explicit costs are not easy to measure since they do not involve a monetary payment.

answer

False

question

Paying Meghan to assemble a computer in your warehouse is considered a direct cost.

answer

True

question

Activity-based costing is a technique used by managerial accountants to assign product costs based on links between activities that drive costs and the production of specific products.

answer

True

question

Joe's accountant has asked him to determine the company's direct and indirect costs. Joe would classify depreciation on the company's copy machine and computers as an indirect cost.

answer

True

question

The accounting department at Cathy's Cupcakes has been asked to determine the company's direct costs. The accountants would need to look at what the company spent on baking supplies, muffin pans and counter help.

answer

True

question

Rapunzel has asked her accounting department to give her a detailed description of how her indirect costs are related to the individual hair care products she produces. The best way of allocating the costs would be to use the two-stage process of activity-based costing.

answer

True

question

Activity based-costing (ABC) is a simple "one size fits all" method of all allocating costs.

answer

False

question

Budgeting is a management tool that explicitly shows how a firm will acquire and use resources needed to achieve its goals over a specific time period.

answer

True

question

A bottom-up approach to budgeting allows for lower level managers to participate in the development of budgets.

answer

True

question

The top-down approach to budgeting is best if the company wants to develop buy-in with first-line supervisors and other lower level management.

answer

False

question

Financial budgets are the budget documents that identify cash and other financial resources the firm will acquire and use to finance operations and make planned investments in fixed assets.

answer

True

question

Operating budget documents include the cash budget and the capital budget.

answer

False

question

The master budget is a combined statement of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period.

answer

True

question

The cash budget identifies short-term fluctuations in cash flow.

answer

True

question

The master budget shows how all of the pieces fit together to form a complete picture.

answer

True

question

The sales budget is the first operating budget created during the budgeting process, because the costs included in other operating budgets depend on the firm's level of sales.

answer

True

question

BigBux, Inc. indicates the number of units of each product it expects to sell, the selling price, and the total dollar value of sales in its cash budget.

answer

False

question

Ted runs Green America, Inc., a nursery and landscape operation. Most of his business occurs in the spring and early summer seasons, yet he makes most of his inventory purchases in the winter. As such, he must be very careful about cash flow fluctuations. The capital expenditure budget would be very helpful for Ted.

answer

False

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