Principles of Financial and Managerial Accounting - D196 Multiple
Choice || Solved Correctly.
Accounting plays a vital role in the decision-making process. Which action is the first step in the
decision-making process?
a. Identify the issue.
b. Identify the alternatives.
c. Guarantee a good outcome.
d. Gather information. correct answers a. Identify the issue.
Identifying the issue is the first step in the decision-making process.
The money that a company needs to buy its land, pay its employees, and buy its supplies is called
capital. What are the potential sources of capital for a business?
a. Taxes, investors, and retained business earnings
b. Employees, investors, and retained business earnings
c. Gross business earnings, employees, and taxes
d. Investors, creditors, and retained business earnings correct answers d. Investors, creditors, and
retained business earnings
Investors, creditors, and retained business earnings are all common sources of capital for a
business.
True or False: Accountants measure and communicate the results of business activities.
a. True
b. False correct answers a. True
,Accountants measure and communicate (report) the results of business activities—in other
words, accountants keep score. To measure these results accurately, accountants follow a
standard set of procedures referred to as the accounting cycle.
Which primary area of accounting generates reports for internal users?
a. Financial accounting
b. Governmental accounting
c. Management accounting
d. General-purpose accounting correct answers c. Management accounting
Management accounting generates reports for internal users, such as budgets and cost analyses.
Which group uses financial information to evaluate whether a company will be able to repay a
loan?
a. Management
b. Lenders
c. Employees
d. Investors correct answers b. Lenders
Lenders are interested in whether or not a company will be able to repay a loan, so they use
financial information to analyze the company's financial ability to do so.
Which of the primary financial statements reports the resources, obligations, and owner's equity
of a company?
a. Balance sheet
b. Income statement
c. Master budget
d. Statement of cash flows correct answers a. Balance sheet
,The balance sheet reports the resources of a company (the assets), the company's obligations (the
liabilities), and the owners' equity, which represents the difference between what is owned
(assets) and what is owed (liabilities).
What is the role of the IASB in regulating accounting standards?
a. Work as a subcommittee of the American Institute of Certified Public Accountants (AICPA) to
regulate accounting instruction
b. Establish international accounting standards
c. Work under the direction of the SEC to establish financial accounting standards
d. Use legal authority to establish financial accounting standards for U.S. companies correct
answers b. Establish international accounting standards
The IASB establishes worldwide accounting standards. The IASB is a private organization based
in London. Currently, the IASB does not have legal authority to set accounting standards for U.S.
companies, although the SEC does allow the use of IASB standards for non-U.S. companies with
shares traded on U.S. stock exchanges. The IASB is a standalone organization (overseen by a
Board of Trustees); it is not under the jurisdiction of the SEC, the European Union, the United
Nations, or any other governmental body. The IASB members represent a broad business
constituency including auditors, corporate accountants, analysts, and even accounting professors.
What group of people make up the FASB?
a. Financial accounting specialists appointed by the U.S. Congress
b. Senior IRS staff members
c. Senior SEC staff members
d. People from a variety of business-related backgrounds correct answers d. People from a
variety of business-related backgrounds
Historically, FASB members have represented a broad business constituency including auditors,
corporate accountants, analysts, and accounting academics. The FASB is not directly controlled
by the SEC, although SEC input is extremely important to the FASB in its deliberations.
, What is the role of the GASB in setting accounting standards?
a. The GASB establishes accounting and reporting standards together with the IRS.
b. The GASB establishes accounting and reporting standards together with the SEC.
c. The GASB is a private-sector organization that establishes accounting and financial reporting
standards for U.S. state and local governments.
d. The GASB establishes accounting and financial reporting standards together with the IASB.
correct answers c. The GASB is a private-sector organization that establishes accounting and
financial reporting standards for U.S. state and local governments.
The GASB sets accounting standards for state and local governments in the United States.
In what way do accountants have an economic incentive to conduct themselves ethically?
a. It is not possible for an unethical accountant to become a certified public accountant.
b. Most computerized accounting systems recognize unethical accounting procedures.
c. The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
d. It is not possible for an unethical accountant to rise to a top management position in a
company. correct answers c. The value of the information produced by accountants is related to
the confidence that users have in the reliability of that information.
Accountants are in the "trust" business. If users of the financial information that is being
prepared do not have confidence in, or do not trust, the information that is being provided to
make business decisions, then the role of the accountant becomes far less important. If
accountants and the accounting system are not reliable and trustworthy, then the value of the
information they produce is lower.
How is it possible for an accountant to intentionally deceive financial statement users and yet
still technically be in compliance with generally accepted accounting principles (GAAP)?
a. There is conflict between FASB rules and SEC rules.
b. There is flexibility inherent in the assumptions underlying the preparation of financial
statements.
Choice || Solved Correctly.
Accounting plays a vital role in the decision-making process. Which action is the first step in the
decision-making process?
a. Identify the issue.
b. Identify the alternatives.
c. Guarantee a good outcome.
d. Gather information. correct answers a. Identify the issue.
Identifying the issue is the first step in the decision-making process.
The money that a company needs to buy its land, pay its employees, and buy its supplies is called
capital. What are the potential sources of capital for a business?
a. Taxes, investors, and retained business earnings
b. Employees, investors, and retained business earnings
c. Gross business earnings, employees, and taxes
d. Investors, creditors, and retained business earnings correct answers d. Investors, creditors, and
retained business earnings
Investors, creditors, and retained business earnings are all common sources of capital for a
business.
True or False: Accountants measure and communicate the results of business activities.
a. True
b. False correct answers a. True
,Accountants measure and communicate (report) the results of business activities—in other
words, accountants keep score. To measure these results accurately, accountants follow a
standard set of procedures referred to as the accounting cycle.
Which primary area of accounting generates reports for internal users?
a. Financial accounting
b. Governmental accounting
c. Management accounting
d. General-purpose accounting correct answers c. Management accounting
Management accounting generates reports for internal users, such as budgets and cost analyses.
Which group uses financial information to evaluate whether a company will be able to repay a
loan?
a. Management
b. Lenders
c. Employees
d. Investors correct answers b. Lenders
Lenders are interested in whether or not a company will be able to repay a loan, so they use
financial information to analyze the company's financial ability to do so.
Which of the primary financial statements reports the resources, obligations, and owner's equity
of a company?
a. Balance sheet
b. Income statement
c. Master budget
d. Statement of cash flows correct answers a. Balance sheet
,The balance sheet reports the resources of a company (the assets), the company's obligations (the
liabilities), and the owners' equity, which represents the difference between what is owned
(assets) and what is owed (liabilities).
What is the role of the IASB in regulating accounting standards?
a. Work as a subcommittee of the American Institute of Certified Public Accountants (AICPA) to
regulate accounting instruction
b. Establish international accounting standards
c. Work under the direction of the SEC to establish financial accounting standards
d. Use legal authority to establish financial accounting standards for U.S. companies correct
answers b. Establish international accounting standards
The IASB establishes worldwide accounting standards. The IASB is a private organization based
in London. Currently, the IASB does not have legal authority to set accounting standards for U.S.
companies, although the SEC does allow the use of IASB standards for non-U.S. companies with
shares traded on U.S. stock exchanges. The IASB is a standalone organization (overseen by a
Board of Trustees); it is not under the jurisdiction of the SEC, the European Union, the United
Nations, or any other governmental body. The IASB members represent a broad business
constituency including auditors, corporate accountants, analysts, and even accounting professors.
What group of people make up the FASB?
a. Financial accounting specialists appointed by the U.S. Congress
b. Senior IRS staff members
c. Senior SEC staff members
d. People from a variety of business-related backgrounds correct answers d. People from a
variety of business-related backgrounds
Historically, FASB members have represented a broad business constituency including auditors,
corporate accountants, analysts, and accounting academics. The FASB is not directly controlled
by the SEC, although SEC input is extremely important to the FASB in its deliberations.
, What is the role of the GASB in setting accounting standards?
a. The GASB establishes accounting and reporting standards together with the IRS.
b. The GASB establishes accounting and reporting standards together with the SEC.
c. The GASB is a private-sector organization that establishes accounting and financial reporting
standards for U.S. state and local governments.
d. The GASB establishes accounting and financial reporting standards together with the IASB.
correct answers c. The GASB is a private-sector organization that establishes accounting and
financial reporting standards for U.S. state and local governments.
The GASB sets accounting standards for state and local governments in the United States.
In what way do accountants have an economic incentive to conduct themselves ethically?
a. It is not possible for an unethical accountant to become a certified public accountant.
b. Most computerized accounting systems recognize unethical accounting procedures.
c. The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
d. It is not possible for an unethical accountant to rise to a top management position in a
company. correct answers c. The value of the information produced by accountants is related to
the confidence that users have in the reliability of that information.
Accountants are in the "trust" business. If users of the financial information that is being
prepared do not have confidence in, or do not trust, the information that is being provided to
make business decisions, then the role of the accountant becomes far less important. If
accountants and the accounting system are not reliable and trustworthy, then the value of the
information they produce is lower.
How is it possible for an accountant to intentionally deceive financial statement users and yet
still technically be in compliance with generally accepted accounting principles (GAAP)?
a. There is conflict between FASB rules and SEC rules.
b. There is flexibility inherent in the assumptions underlying the preparation of financial
statements.
