Question 1

One of the key financial statements prepared in the fifth step of the accounting cycle is:

Accepted Answer

A)   general journal.
B)   statement of cash flows.
C)   asset summary.
D)   social audit.

Question 2

Explain the differences between managerial and financial accounting, and give examples of the types of problems and issues examined by each of these areas of accounting.

Accepted Answer

Managerial accounting is used to provide...

Question 3

Accounting transactions are very important to a firm's operations. Which of the following activities would affect the firm's account balances?

Accepted Answer

A)   Buying and selling goods and services
B)   Interviewing prospective employees
C)   Understanding economic reports
D)   Forecasting consumer demand

Question 4

An accountant who works for a single business or government agency is referred to as a:

Accepted Answer

A)   public accountant.
B)   private accountant.
C)   certified accountant.
D)   commission accountant.

Question 5

The work of a certified management accountant is intended to enable people outside of the organization to make investment decisions.

Accepted Answer

A) True 
 B)False

Question 6

__________ involves the review and evaluation of the records that are used to prepare the organization's financial statements.

Accepted Answer

A)   Auditing
B)   Financial accounting
C)   Managerial accounting
D)   Certified bookkeeping

Question 7

Net income is simply the difference between revenue and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 8

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Accepted Answer

A) True 
 B)False

Question 9

What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

Accepted Answer

The income statement will show:
...

Question 10

The inventory turnover ratio for all firms should be greater than 2 times.

Accepted Answer

A) True 
 B)False

Question 11

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

Accepted Answer

A)   tax accountants.
B)   certified public accountants.
C)   certified management accountants.
D)   certified internal auditors.

Question 12

According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

Accepted Answer

A) True 
 B)False

Question 13

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 14

Although a firm may use different inventory valuation methods, generally accepted accounting principles (GAAP) states that these methods must produce the same dollar value for the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting.

Accepted Answer

A) True 
 B)False

Question 16

A company's income statement is important to accountants and other stakeholders. It reveals a:

Accepted Answer

A)   company's sources of funding.
B)   company's ability to distribute goods or services in a timely manner.
C)   company's ability to earn a profit over time.
D)   company's capitalized value.

Question 17

Accounting recognizes that assets, such as machinery and buildings, lose value over time. Accountants will record a portion of the cost of an asset as an expense each year through the use of:

Accepted Answer

A)   asset valuation.
B)   asset audits.
C)   appreciation.
D)   depreciation.

Question 18

The main reason an accountant would conduct a trial balance is to:

Accepted Answer

A)   determine whether account figures in the ledger are correct and balanced.
B)   obtain an estimate of the amount of taxes the firm owes.
C)   ensure the audit was done correctly.
D)   verify the validity of last year's balance sheet before beginning the next accounting cycle.

Question 19

The two major classes of operating expenses are current expenses and long-term expenses.

Accepted Answer

A) True 
 B)False

Question 20

Preferred Pet Care, Inc., has recorded the following on its income statement for the period ending December 31, 2016:  The return on sales = 34%. This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

The two major classes of operating expenses are current expenses and long-term expenses.

Correct AnswerverifiedShow Answer

Explain the differences between managerial and financial accounting, and give examples of the types of problems and issues examined by each of these areas of accounting.

Correct AnswerverifiedManagerial accounting is used to provide...View AnswerShow Answer

Preferred Pet Care, Inc., has recorded the following on its income statement for the period ending December 31, 2016: The return on sales = 34%. This return is outstanding and there is no need to compare this return to competitors in the veterinary services industry.

Correct AnswerverifiedShow Answer

The inventory turnover ratio for all firms should be greater than 2 times.

Correct AnswerverifiedShow Answer

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Correct AnswerverifiedShow Answer

Accounting recognizes that assets, such as machinery and buildings, lose value over time. Accountants will record a portion of the cost of an asset as an expense each year through the use of:

Correct AnswerverifiedShow Answer

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending. The type of accounting information Martha and her group will follow most closely is provided by certified public accountants.

Correct AnswerverifiedShow Answer

The main reason an accountant would conduct a trial balance is to:

Correct AnswerverifiedShow Answer

A company's income statement is important to accountants and other stakeholders. It reveals a:

Correct AnswerverifiedShow Answer

__________ involves the review and evaluation of the records that are used to prepare the organization's financial statements.

Correct AnswerverifiedShow Answer

The work of a certified management accountant is intended to enable people outside of the organization to make investment decisions.

Correct AnswerverifiedShow Answer

According to generally accepted accounting principles (GAAP), a firm must use the inventory valuation method that most accurately reflects the actual movement of goods through its inventory.

Correct AnswerverifiedShow Answer

What is the difference between a profit (net income after taxes) on an income statement and the cash balance reflected at the bottom of the statement of cash flows?

Correct AnswerverifiedThe income statement will show:...View AnswerShow Answer

One of the key financial statements prepared in the fifth step of the accounting cycle is:

Correct AnswerverifiedShow Answer

An accountant who works for a single business or government agency is referred to as a:

Correct AnswerverifiedShow Answer

The Internal Revenue Service is responsible for establishing accounting standards used by accountants working in government accounting.

Correct AnswerverifiedShow Answer

Skilled professionals who are responsible for the development of strategies to minimize taxes are called:

Correct AnswerverifiedShow Answer

Accounting transactions are very important to a firm's operations. Which of the following activities would affect the firm's account balances?

Correct AnswerverifiedShow Answer

Although a firm may use different inventory valuation methods, generally accepted accounting principles (GAAP) states that these methods must produce the same dollar value for the cost of goods sold.

Correct AnswerverifiedShow Answer

Net income is simply the difference between revenue and cost of goods sold.

Correct AnswerverifiedShow Answer

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Managerial accounting is used to provide...
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The income statement will show:
...
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