Question 1

A bookkeeper's first task is to record the firm's transactions in a journal.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would be classified as a general expense on an income statement?

Accepted Answer

A)   Salaries paid to salespeople
B)   Dividends paid to stockholders
C)   Payments made for insurance
D)   Costs associated with an advertising campaignE) A) and B)
F) All of the above

Question 3

Generally the higher the risk involved in an activity, the ________ the rate of return expected by investors.

Accepted Answer

A)   higher
B)   lower
C)   more stable
D)   less frequentE) None of the above
F) A) and D)

Question 4

Assets are reported on the firm's balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

Rents, salaries, utilities and insurance are examples of operating expenses.

Accepted Answer

A) True 
 B)False

Question 6

Jill wants to start her own business, but knows little about how to set up an accounting system or interpret financial information. "I'm not worried about accounting," she tells her friends. "I'll just hire a part-time bookkeeper to handle all that type of stuff, and focus my attention on what I like-finding ways to satisfy my customers." Which of the following is the best response to Jill's comments?

Accepted Answer

A)   Fine. Just make sure the bookkeeper you hire knows how to use a database, since this type of software is the heart of any efficient accounting system.
B)   Although you can hire someone to keep your books, you'll still need to know how to read, understand, and interpret basic accounting reports in order to make good business decisions.
C)   Most entrepreneurs would agree with your opinion. The work done by accountants is mainly clerical in nature, so time spent by business owners on accounting tends to take them away from more important tasks.
D)   You have a good plan. Only managers of large firms require knowledge of accounting. Owners and managers of small businesses can easily get by with just a part-time bookkeeper.E) A) and B)
F) A) and C)

Question 7

The acid-test ratio is found by dividing inventory by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 8

The value of resources the firm owns, minus the amount of money the firm owes to others = ____________.

Accepted Answer

A)   liabilities.
B)   liquidity.
C)   leverage.
D)   owners' equity.E) All of the above
F) A) and C)

Question 9

The statement of cash flows identifies cash receipts and disbursements that result _______________.

Accepted Answer

A)   from selling goods and/or services, exclusively.
B)   solely from a firm's investments.
C)   from a firm's operations and investment activities, but not from financing activities.
D)   from a firm's operations, investment, and financing activities.E) A) and B)
F) A) and C)

Question 10

A person's pulse rate and blood pressure are indicators of a person's health. Similarly, _________ can help assess the health of a business.

Accepted Answer

A)   financial statements
B)   production schedules
C)   transactions
D)   databasesE) A) and B)
F) A) and C)

Question 11

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care, Inc. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 12

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n) :

Accepted Answer

A)   auditor.
B)   forensic accountant.
C)   bookkeeper.
D)   purchasing agent.E) A) and D)
F) A) and C)

Question 13

The balance sheet is composed of the following types of accounts:

Accepted Answer

A)   revenue, expenses, and earnings.
B)   operating expenses, cash flow, and capital expenditures.
C)   capital, cost, and valuation.
D)   assets, liabilities, and owners' equity.E) A) and D)
F) A) and C)

Question 14

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Accepted Answer

A) True 
 B)False

Question 15

Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each.

Accepted Answer

Balance sheet reports the firm's financi...

Question 16

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Accepted Answer

A) True 
 B)False

Question 17

A basic difference between managerial accounting and financial accounting is that managerial accounting:

Accepted Answer

A)   adheres to rules set by the GASB, while financial accounting uses a different group of rules set by the FASB.
B)   involves the preparation of the balance sheet and income statement while financial accounting involves the preparation of the statement of cash flows.
C)   handles recording and classifying information about transactions that have no direct financial impact on the firm, while financial accounting handles the recording and classifying of information about transactions that do have a financial impact.
D)   provides information primarily intended for managers and others inside the company, while financial accounting provides information primarily intended for people outside the organization.E) A) and B)
F) None of the above

Question 18

The accounting profession follows generally accepted accounting principles as defined by ___________________.

Accepted Answer

A)   GAAP.
B)   the PCAOB (Public Company Accounting Oversight Board) .
C)   the FASB (Financial Accounting Standards Board) .
D)   the Sarbanes-Oxley Act.E) A) and C)
F) None of the above

Question 19

Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob?

Accepted Answer

A)   return on sales
B)   return on equity
C)   inventory turnover
D)   acid test ratioE) B) and C)
F) A) and B)

Question 20

Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company.

Accepted Answer

A) True 
 B)False

Exam 17: Understanding Accounting and Financial Information

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n) :

Correct Answer
verified

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Correct Answer
verified

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care, Inc. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Correct Answer
verified

A basic difference between managerial accounting and financial accounting is that managerial accounting:

Correct Answer
verified

A bookkeeper's first task is to record the firm's transactions in a journal.

Correct Answer
verified

The accounting profession follows generally accepted accounting principles as defined by ___________________.

Correct Answer
verified

The acid-test ratio is found by dividing inventory by cost of goods sold.

Correct Answer
verified

Rents, salaries, utilities and insurance are examples of operating expenses.

Correct Answer
verified

Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob?

Correct Answer
verified

The balance sheet is composed of the following types of accounts:

Correct Answer
verified

Which of the following would be classified as a general expense on an income statement?

Correct Answer
verified

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Correct Answer
verified

The statement of cash flows identifies cash receipts and disbursements that result _______________.

Correct Answer
verified

Assets are reported on the firm's balance sheet.

Correct Answer
verified

Generally the higher the risk involved in an activity, the ________ the rate of return expected by investors.

Correct Answer
verified

The value of resources the firm owns, minus the amount of money the firm owes to others = ____________.

Correct Answer
verified

A person's pulse rate and blood pressure are indicators of a person's health. Similarly, _________ can help assess the health of a business.

Correct Answer
verified

Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company.

Correct Answer
verified

Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each.

Correct Answer
verified
Balance sheet reports the firm's financi...
View Answer

Correct Answer
verified

Exam 17: Understanding Accounting and Financial Information

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n) :

Correct AnswerverifiedShow Answer

The LIFO method of inventory valuation assumes the newest items in inventory are sold first.

Correct AnswerverifiedShow Answer

A loan officer at Southwest Bank is considering a loan application from Preferred Pet Care, Inc. He is concerned about the company's ability to make payments on the loan. The loan officer is likely to be interested in Preferred Pet Care's statement of cash flows.

Correct AnswerverifiedShow Answer

A basic difference between managerial accounting and financial accounting is that managerial accounting:

Correct AnswerverifiedShow Answer

A bookkeeper's first task is to record the firm's transactions in a journal.

Correct AnswerverifiedShow Answer

The accounting profession follows generally accepted accounting principles as defined by ___________________.

Correct AnswerverifiedShow Answer

The acid-test ratio is found by dividing inventory by cost of goods sold.

Correct AnswerverifiedShow Answer

Rents, salaries, utilities and insurance are examples of operating expenses.

Correct AnswerverifiedShow Answer

Bob Stewart plans to visit his financial planner today to discuss investment strategy. As a young accountant, he knows he can afford to invest in a few riskier investments. Which of the following ratios will be an important measure of profitability for Bob?

Correct AnswerverifiedShow Answer

The balance sheet is composed of the following types of accounts:

Correct AnswerverifiedShow Answer

Which of the following would be classified as a general expense on an income statement?

Correct AnswerverifiedShow Answer

The current ratio is a good indicator of the degree to which a firm relies on borrowed funds in its operations.

Correct AnswerverifiedShow Answer

The statement of cash flows identifies cash receipts and disbursements that result _______________.

Correct AnswerverifiedShow Answer

Assets are reported on the firm's balance sheet.

Correct AnswerverifiedShow Answer

Generally the higher the risk involved in an activity, the ________ the rate of return expected by investors.

Correct AnswerverifiedShow Answer

The value of resources the firm owns, minus the amount of money the firm owes to others = ____________.

Correct AnswerverifiedShow Answer

A person's pulse rate and blood pressure are indicators of a person's health. Similarly, _________ can help assess the health of a business.

Correct AnswerverifiedShow Answer

Recent accounting scandals raised serious questions about the legitimacy of an accounting firm performing both auditing and consulting work for the same company.

Correct AnswerverifiedShow Answer

Identify the three key financial statements that corporations are required to prepare, and describe the type of information found on each.

Correct AnswerverifiedBalance sheet reports the firm's financi...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Balance sheet reports the firm's financi...
View Answer

Correct Answer
verified