Accounting for Decision Makers

1) Which of the following is the most correct definition of accounting? a. The preservation of a systematic, quantitative record of an activity. b. A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. c. The procedures and processes used by a company to analyze transactions and handle routine bookkeeping tasks. d. An entity without a profit objective, oriented toward providing services efficiently and effectively. - correct answer b. A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. 2) Businesses use accounting systems to a. Analyze transactions b. Handle routine bookkeeping tasks c. Evaluate the performance and health of the business d. All of the above - correct answer d. All of the above 3) Which of the following is NOT a function of accounting? a. Executing sales transactions for organizations b. Communicating economic information about organizations c. Measuring economic information about organizations d. Accumulating economic information about organizations - correct answer a. Executing sales transactions for organizations 4) Which of the following is NOT a key component of the definition of accounting? a. Financial b. Decision-oriented c. Qualitative d. Useful - correct answer c. Qualitative 5) Which of the following is NOT typically true of accounting information? a. The information relates to specific accounting entities. b. The information is primarily financial in nature. c. The information relates to future time periods. d. The information is quantitative in nature. - correct answer d. The information is quantitative in nature. 6) Which of the following is NOT one of the three primary financial statements? a. Balance Sheet b. Income statement c. Statement of cash flows d. Statement of retained earnings - correct answer d. Statement of retained earnings 7) Which of the following financial statements reports a company's resources, obligations, and owner's equity? a. Statement of retained earnings b. Statement of cash flows c. Income statement d. Balance sheet - correct answer d. Balance sheet 8) Which of the following financial statements reports the excess of a company's revenues over its expenses? a. Statement of retained earnings b. Statement of cash flows c. Income statement d. Balance sheet - correct answer c. Income statement 9) Which of the following financial statements reports the amount of cash collected and paid out by a company? a. Balance sheet b. Statement of retained earnings c. Statement of cash flows d. Income statement - correct answer c. Statement of cash flows 10) The emphasis in financial accounting is on which of the following external user groups? a. Management b. Investors and creditors c. Educators d. Certified Public Accountants - correct answer b. Investors and creditors 11) The primary internal group that uses accounting information is a. Government agencies b. Investors c. Management d. Competitors - correct answer c. Management 12) Internal reports are generally used by a. Lenders b. Management c. Employees d. Suppliers - correct answer b. Management 13) Which of the following is NOT an external user of financial information? a. Competitors b. Suppliers c. Customers d. Management - correct answer d. Management 14) Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? a. It seeks consistency for its proposed standards b. It consists of seven full-time members c. It has no legal power to enforce the standards it sets d. It is a government agency - correct answer d. It is a government agency 15) Generally accepted accounting principles are a. Natural laws b. Based on scientific proofs c. Developed by accounting rule makers d. None of these are correct - correct answer c. Developed by accounting rule makers 16) The initials GAAP stand for a. Generally Applied Accounting Procedures b. General Accounting Administration Practices c. Generally Accepted Accounting Practices d. Generally Accepted Accounting Principles - correct answer d. Generally Accepted Accounting Principles 17) The current standard-setting board for accounting in the private sector in the US is the a. Securities and Exchange Commission (SEC) b. American Accounting Association (AAA) c. International Accounting Standards Board (IASB) d. Financial Accounting Standards Board (FASB) - correct answer d. Financial Accounting Standards Board (FASB) 18) The organization that develops worldwide accounting standards is the a. International Accounting Standards Board (IASB) b. International Board of Accounting Standards (IBAS) c. International Committee on Accounting Standards (ICAS) d. International Accounting Standards Committee (IASC) - correct answer a. International Accounting Standards Board (IASB) 19) Which of the following is NOT a service typically provided by large public accounting firms? a. Making management decisions b. Establishing accounting systems c. Redesigning operating procedures d. Performing audits - correct answer a. Making management decisions 20) The initials CPA stand for a. Certified Public Auditor b. Certified Professional Accountant c. Certified Public Accountant d. Certified Professional Appraiser - correct answer c. Certified Public Accountant 21) Standards established by the International Accounting Standards Board are referred to as a. International Financial Accounting Standards b. International Auditing Standards c. International Financial Reporting Standards d. Generally Accepted Accounting Standards - correct answer c. International Financial Reporting Standards 22) Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies? a. Financial Accounting Standards Board (FASB) b. Securities and Exchange Commission (SEC) c. Internal Revenue Service (IRS) d. American Institute of Certified Public Accountants (AICPA) - correct answer b. Securities and Exchange Commission (SEC) 23) Which of the following is NOT a reason for the integration of worldwide accounting standards? a. the need to evaluate investments across the world b. the increased efficiency of financial markets c. the theoretical necessity of a common set of accounting standards d. the integration of the global economy - correct answer c. the theoretical necessity of a common set of accounting standards 24) The International Accounting Standards Board (IASB) is charged with developing worldwide accounting practices? a. True b. False - correct answer a. True 25) With the current state of information technology, investors outside a company are now allowed access to a company's internal database of financial information and do their own customized analysis of a firm's performance. a. True b. False - correct answer b. False 26) Increased federal oversight of the audit process resulted from the passage of the following act of Congress - a. Sarbanes-Oxley Act b. Financial Reports Act c. Access to High Standards Act d. AGOA Acceleration Act - correct answer a. Sarbanes-Oxley Act 27) A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment. a. True b. False - correct answer a. True 28) Which of the following is NOT one of the three primary financial statements? a. The Statement of Retained Earnings b. The Balance Sheet c. The Statement of Cash Flows d. The Income Statement - correct answer a. The Statement of Retained Earnings 29) One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance. a. True b. False - correct answer a. True 30) The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the a. Cost principle b. Arm's-length transaction assumption c. Going concern assumption d. Monetary measurement principle - correct answer a. Cost principle 31) Which of the following accounts is considered to be the most liquid? a. Land b. Accounts receivable c. Inventory d. Cash - correct answer d. Cash 32) Which of the following would be considered a long-term liability? a. Mortgage payable b. Land c. Wages payable d. Accounts payable - correct answer a. Mortgage payable 33) Economic resources that are owned or controlled by an enterprise are called a. Revenues b. Liabilities c. Gains d. Assets - correct answer d. Assets 34) Which of the following distinguishes between current and long-term assets? a. Income statement b. Liquidity balance sheet c. Comparative balance sheet d. Classified balance sheet - correct answer d. Classified balance sheet 35) The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the a. Arm's-length transaction assumption b. Monetary measurement concept c. Going concern concept