ACCOUNTING TOOLS FOR BUSINESS
DECISION MAKING UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
COMPLETE STUDY GUIDE FULL SOLUTION
●● Human error, collusion, management override, and cost-benefit
constraints can reduce effectiveness of internal controls.
Answer: Limitations of Internal Controls
●● Dividing responsibilities among different employees so that one
person does not control all parts of a transaction.
Answer: Segregation of Duties
●● A method where uncollectible accounts are recorded as bad debt
expense only when determined to be worthless.
Answer: Direct Write-Off Method
●● A method that estimates uncollectible accounts receivable at the end
of each accounting period using an allowance account.
Answer: Allowance Method
●● Cash received before goods or services are provided; recorded as a
liability until earned.
, Answer: Unearned Revenue
●● Limited liability, easier transfer of ownership, continuous life, and
easier access to capital.
Answer: Advantages of Corporations
●● Double taxation, more government regulation, and higher setup
costs.
Answer: Disadvantages of Corporations
●● Vote in elections, receive dividends, inspect records, share in assets
upon liquidation, and maintain ownership percentage through
preemptive rights.
Answer: Rights of Stockholders
●● A financial statement reporting cash receipts and cash payments from
operating, investing, and financing activities.
Answer: Statement of Cash Flows
●● Cash activities involving debt, stock, and dividends.
Answer: Financing Activities
●● Cash activities involving the purchase and sale of long-term assets
and investments.
DECISION MAKING UPDATED ACTUAL
QUESTIONS AND CORRECT ANSWERS
COMPLETE STUDY GUIDE FULL SOLUTION
●● Human error, collusion, management override, and cost-benefit
constraints can reduce effectiveness of internal controls.
Answer: Limitations of Internal Controls
●● Dividing responsibilities among different employees so that one
person does not control all parts of a transaction.
Answer: Segregation of Duties
●● A method where uncollectible accounts are recorded as bad debt
expense only when determined to be worthless.
Answer: Direct Write-Off Method
●● A method that estimates uncollectible accounts receivable at the end
of each accounting period using an allowance account.
Answer: Allowance Method
●● Cash received before goods or services are provided; recorded as a
liability until earned.
, Answer: Unearned Revenue
●● Limited liability, easier transfer of ownership, continuous life, and
easier access to capital.
Answer: Advantages of Corporations
●● Double taxation, more government regulation, and higher setup
costs.
Answer: Disadvantages of Corporations
●● Vote in elections, receive dividends, inspect records, share in assets
upon liquidation, and maintain ownership percentage through
preemptive rights.
Answer: Rights of Stockholders
●● A financial statement reporting cash receipts and cash payments from
operating, investing, and financing activities.
Answer: Statement of Cash Flows
●● Cash activities involving debt, stock, and dividends.
Answer: Financing Activities
●● Cash activities involving the purchase and sale of long-term assets
and investments.
