Deck 8: Accounting: Decision Making by the Numbers

Question 1

Jobs performed by accountants do not require expertise in complex subject areas

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Public accountants ensure that the government's expenditures are maintained in compliance with regulations.

Answer 3

False

Question 4

Stockholders sometimes refer to accounting information as the "language of business" because they rely heavily on financial information for progress.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

Many accountants become certified fraud examiners due to the less rigorous requirements of becoming a certified public accountant.

Question 11

Government accountants provide services such as external auditing and management consulting to clients on a fee basis.

Question 12

Achieving recognition as a certified public accountant is easy and does not require direct experience in the accounting field.

Question 13

Internal auditors identify mismanagement and employee theft in organizations which employ them.

Question 14

Government agencies, such as the Securities and Exchange Commission (SEC), are typically audited by public accountants.

Question 15

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

Question 16

Creditors primarily use accounting information to meet the reporting needs of federal and state agencies.

Question 17

The Financial Accounting Standards Board is a private organization with the legal authority to develop and enforce generally accepted accounting principles.

Question 18

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

Question 19

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

Question 20

The ability to understand accounting information is not valuable to a person investing in a business.

Question 21

Bernie calls his accountant to determine how much money his company owes to its supplier of raw materials. He should ask his accountant to provide him with the company's balance sheet.

Question 22

Balance sheets reflect three key terms in the accounting equation: assets, liabilities, and cost of goods sold.

Question 23

The purpose of generally accepted accounting principles (GAAP) is to ensure that financial statements are relevant, reliable, consistent, and comparable.

Question 24

Iang aai bnsatl atnhcee a sshseetest ,o of w thnee rfsir' meq. uity indicates the claims a firm's owners have

Question 25

Assets = Liabilities + Net Income.

Question 26

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

Question 27

A balance sheet summarizes 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.

Question 28

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) work together to find ways to make U.S. accounting practices more consistent with those in other nations.

Question 29

According to the accounting equation, the value of a firm's assets should be less than the financing provided by the creditors and the owners of the firm.

Question 30

Liabilities do not include bank loans and current payments owed to suppliers.

Question 31

The Taylix Company's balance sheet showed $18,000,000 in assets and $10,000,000 in liabilities. From the given information, the firm's owners' equity equals $6,000,000.

Question 32

It is mandatory for all members of the Financial Accounting Standards Board (FASB) to sever all ties with any firms or institutions they served prior to joining the board.

Question 33

Due to accounting scandals, many state accounting boards have imposed new ethics­related requirements.

Question 34

Accounts payable are listed under assets on a balance sheet.

Question 35

The members of the Financial Accounting Standards Board (FASB) are appointed by the Securities and Exchange Commission.

Question 36

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

Question 37

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

Question 38

Copyrights and trademarks are tangible assets.

Question 39

The Financial Accounting Standards Board comprises ten members, with each member serving a three­year term.

Question 40

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

Question 41

A statement of cash flows reports the revenues, expenses, and net income that results from a firm's operations over a given period of time.

Question 42

Operating cash flows of a firm should be exactly equal to the revenues and expenses that the firm reports on its income statement.

Question 43

When an external auditor doesn't uncover any problems with a firm's financial methods and statements, he or she will issue an unqualified opinion.

Question 44

In the statement of retained earnings, the change in retained earnings is found by subtracting dividends paid to shareholders from net income.

Question 45

The first step involved in deducting costs from revenue is to deduct costs of goods sold.

Question 46

The stockholders' equity statement can show how net income and dividends affect retained earnings.

Question 47

It is mandatory for publicly traded firms in the United States to have an independent CPA firm perform an annual external audit of their financial statements.

Question 48

Cash flows from operational activities show any cash used to buy fixed assets and long­term financial investments.

Question 49

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

Question 50

Kale Inc. uses accrual­basis accounting. It can be said that Kale's revenue initially reflects as an increase in accounts receivable instead of an increase in cash.

Question 51

A statement of cash flows identifies cash flows from three types of activities: production, sales, and promotional activities.

Question 52

Bryan, an external auditor, finds minor problems in a company's financial report but is of the view that it is an unbiased and precise version of the company's financial status. He is likely to issue an adverse opinion to the company.

Question 53

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

Question 54

A college student registers for classes and pays tuition with a credit card. As the college uses accrual­basis accounting, it will recognize the payment as revenue after it receives the cash in its bank account.

Question 55

Steve's business checking account is short on cash. He calls his accountant to determine his profits for the previous month. The income statement is his best source of information to ascertain his profit and loss.

Question 56

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

Question 57

Expenses = Revenue ­ Net Income.

Question 58

Revenue is a decrease in the amount of cash and other assets that a firm earns from the sale of goods.

Question 59

Net operating income is the difference between a firm's revenue and its cost of goods sold.

Question 60

In the context of an auditor's report, an unqualified opinion and a clean opinion are the same thing.

Question 61

Information from the cash budget, the capital expenditure budget, and the budgeted income statement are combined to form the budgeted balance sheet.

Question 62

Budgeting encourages communication and coordination among managers and employees in various departments within an organization.

Question 63

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

Question 64

Laura and Abby are evaluating three telecommunication companies to determine the best company to invest in. Horizontal analysis will enable them to make comparisons of financial statements of the three companies over the past several years and help determine the increase in their profits.

Question 65

Financial budgets identify projected sales and production goals and the various costs a firm will incur to meet these goals.

Question 66

The Securities and Exchange Commission (SEC) does not require publicly traded corporations to provide comparative financial statements.

Question 67

A bottom­up approach to budgeting allows lower level managers to participate in the development of budgets.

Question 68

Managerial accounting involves preparing financial statements for use by external stakeholders such as owners, creditors, and suppliers.

Question 69

In the top­down approach to budgeting, companies allow middle and supervisory managers to participate actively in the creation of a budget.

Question 70

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

Question 71

Horizontal analysis involves analyzing information in financial statements by expressing various accounts as percentages of a base amount.

Question 72

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

Question 73

The budgeted balance sheet indicates how a firm's operations, investing, and financing activities affect its assets, liabilities, and owners' equity accounts.

Question 74

The cash budget identifies when a firm might have a temporary surplus of cash that it could invest.

Question 75

Information provided by managerial accounting is available to the general public.

Question 76

A master budget combines operational and financial budgets to represent a firm's overall plan of action for a specified time period.

Question 77

The preparation of operating budgets begins with the development of a sales budget.

Question 78

The Sarbanes­Oxley Act of 2002 prohibited business relationships that might create conflicts of interest between CPA firms and the companies they audit.

Question 79

Comparative balance sheets show whether a firm's net income increased or decreased with any changes in the revenues and expenses over recent years.

Question 80

Ted runs Green America, Inc., a nursery and landscape operation. His business flourishes during spring and early summer, but he makes most of his inventory purchases in the earlier winter. He needs to be extremely careful about cash flow fluctuations. In this case, the capital expenditure budget would be the most beneficial for Ted.