Assessment Section 1
1
1/1
Your boss approaches you with a concerning letter from the IRS and asks you to
explain the role of the IRS in regulating accounting standards. Based on the role of
the IRS, what could be the problem detailed in the letter?
The company has not filed its taxes in accordance with the law.
Correct! The role of the IRS is to ensure that tax filing complies with financial
accounting standards.
2
1/1
Anika is considering investing in a tech company that is known for developing smart
home appliances. Before investing, Anika first wants to ensure that the company’s
past financial performance has been satisfactory and that the company manages
its cash flows well. What type of accounting information would provide this
evidence for Anika?
Financial reports
Correct! Financial reports are used by individuals and organizations that have
an economic interest in the business. They provide information about the
financial performance of a company.
3
1/1
Alliah Company just released its public accounting data for 20X9. Which user of
accounting information will monitor this data to ensure that the company is
providing sufficient information for investors?
Government agencies
Correct! This is the role of the SEC, a federal government agency.
4
1/1
,A new product line manager approaches the accounting department in order to
understand the past performance of the product line he has been asked to manage
in the future. Which role of accounting involves obtaining and using financial
information to determine the financial health and performance of a business or
product line?
Evaluation
Correct! This is an example of evaluation.
5
1/1
You read in the newspaper that a local company you are familiar with has been
found guilty in court of publishing financial statements that are false and
misleading to users of those financial statements. In this situation, what could the
American Institute of Certified Public Accountants (AICPA) do in response to the
accountants who were found guilty of unethical conduct in accounting practices?
Implement professional sanctions
Correct! The AICPA can enforce professional sanctions by taking away the
CPA designation from an accountant who has acted unethically.
1
1/1
What is the correct summary sequence in the accounting cycle?
Analyze, Record, Summarize, Prepare
Correct! This is the proper sequence in the accounting cycle.
2
1/1
Business documents, such as a sales invoice, a purchase order, or a check stub, are
an important part of the accounting process. From an accounting cycle standpoint,
what is purpose of business documents?
To confirm that a transaction has occurred
, Correct! Important purposes of business documents are to confirm that a
transaction has occurred, to establish the amounts to be recorded, and to
facilitate the analysis of business events.
3
1/1
What is the purpose of the financial accounting cycle?
To turn transactions into financial statements and provide useful financial
information for decision makers
Correct! This is the purpose of the financial accounting cycle.
4
1/1
What is a transaction in accounting?
An interaction in which two parties exchange something of value
Correct! This is the definition of a transaction.
1
1/1
In the context of the financial accounting cycle, what is the definition of an account?
A purchase of an item without paying cash immediately, agreeing to pay later
A specific accounting record that provides an efficient way to categorize
similar types of transactions
Correct! An account is a specific accounting record that provides an efficient
way to categorize similar transactions. You can think of an individual account
as a summary of every transaction affecting a certain item, such as cash.
Examples of asset accounts are cash, inventory, and equipment. Liability
accounts include accounts payable and notes payable.
A written description of an event, summarizing both the positive and the
negative aspects of the event
A relationship with a customer reflecting past sales, cash collections, and
future orders
2
, 1/1
What is an arm’s-length transaction?
An exchange between two related parties
An exchange of cash for some other asset
An exchange between two independent parties
Correct! This describes an arm’s-length transaction.
An exchange of inventory for employee wages
3
1/1
Which event represents a transaction recorded as part of the financial accounting
cycle?
The marketing department’s press release about a new product
The company’s press release announcing a new factory
The sale of a product for cash or on account
Correct! The sale of a product is an external transaction and is recorded on a
company’s books.
The hiring of a new employee
4
1/1
A company sells a product to a customer on account. Which part(s) of the
accounting equation does this particular transaction change?
Both assets and owners’ equity
Correct! This transaction changes both assets and owners’ equity to keep the
accounting equation in balance.
Assets only
Both assets and liabilities
Liabilities only
5
1/1
1
1/1
Your boss approaches you with a concerning letter from the IRS and asks you to
explain the role of the IRS in regulating accounting standards. Based on the role of
the IRS, what could be the problem detailed in the letter?
The company has not filed its taxes in accordance with the law.
Correct! The role of the IRS is to ensure that tax filing complies with financial
accounting standards.
2
1/1
Anika is considering investing in a tech company that is known for developing smart
home appliances. Before investing, Anika first wants to ensure that the company’s
past financial performance has been satisfactory and that the company manages
its cash flows well. What type of accounting information would provide this
evidence for Anika?
Financial reports
Correct! Financial reports are used by individuals and organizations that have
an economic interest in the business. They provide information about the
financial performance of a company.
3
1/1
Alliah Company just released its public accounting data for 20X9. Which user of
accounting information will monitor this data to ensure that the company is
providing sufficient information for investors?
Government agencies
Correct! This is the role of the SEC, a federal government agency.
4
1/1
,A new product line manager approaches the accounting department in order to
understand the past performance of the product line he has been asked to manage
in the future. Which role of accounting involves obtaining and using financial
information to determine the financial health and performance of a business or
product line?
Evaluation
Correct! This is an example of evaluation.
5
1/1
You read in the newspaper that a local company you are familiar with has been
found guilty in court of publishing financial statements that are false and
misleading to users of those financial statements. In this situation, what could the
American Institute of Certified Public Accountants (AICPA) do in response to the
accountants who were found guilty of unethical conduct in accounting practices?
Implement professional sanctions
Correct! The AICPA can enforce professional sanctions by taking away the
CPA designation from an accountant who has acted unethically.
1
1/1
What is the correct summary sequence in the accounting cycle?
Analyze, Record, Summarize, Prepare
Correct! This is the proper sequence in the accounting cycle.
2
1/1
Business documents, such as a sales invoice, a purchase order, or a check stub, are
an important part of the accounting process. From an accounting cycle standpoint,
what is purpose of business documents?
To confirm that a transaction has occurred
, Correct! Important purposes of business documents are to confirm that a
transaction has occurred, to establish the amounts to be recorded, and to
facilitate the analysis of business events.
3
1/1
What is the purpose of the financial accounting cycle?
To turn transactions into financial statements and provide useful financial
information for decision makers
Correct! This is the purpose of the financial accounting cycle.
4
1/1
What is a transaction in accounting?
An interaction in which two parties exchange something of value
Correct! This is the definition of a transaction.
1
1/1
In the context of the financial accounting cycle, what is the definition of an account?
A purchase of an item without paying cash immediately, agreeing to pay later
A specific accounting record that provides an efficient way to categorize
similar types of transactions
Correct! An account is a specific accounting record that provides an efficient
way to categorize similar transactions. You can think of an individual account
as a summary of every transaction affecting a certain item, such as cash.
Examples of asset accounts are cash, inventory, and equipment. Liability
accounts include accounts payable and notes payable.
A written description of an event, summarizing both the positive and the
negative aspects of the event
A relationship with a customer reflecting past sales, cash collections, and
future orders
2
, 1/1
What is an arm’s-length transaction?
An exchange between two related parties
An exchange of cash for some other asset
An exchange between two independent parties
Correct! This describes an arm’s-length transaction.
An exchange of inventory for employee wages
3
1/1
Which event represents a transaction recorded as part of the financial accounting
cycle?
The marketing department’s press release about a new product
The company’s press release announcing a new factory
The sale of a product for cash or on account
Correct! The sale of a product is an external transaction and is recorded on a
company’s books.
The hiring of a new employee
4
1/1
A company sells a product to a customer on account. Which part(s) of the
accounting equation does this particular transaction change?
Both assets and owners’ equity
Correct! This transaction changes both assets and owners’ equity to keep the
accounting equation in balance.
Assets only
Both assets and liabilities
Liabilities only
5
1/1
