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Q:
Which of the following statements is true about fixed costs?
A. They can be assigned to a specific item sold or manufactured.
B. They are unaffected by changes in output.
C. They increase as the number of units produced increases.
D. They include expendables.
Q:
Identify the managerial accounting technique which looks at the fixed and variable costs of a business to arrive at a number of unit sales to maximize gains.
A. Cost-volume-profit analysis
B. Marginal revenue costs analysis
C. Break even analysis
D. Cash flow analysis
Q:
Aaron, a businessman, has a method of keeping track of accounts receivable by sorting them into groups of those that are 30, 60, 90, and over 90 days past due. Which of the following actions will the collection agency which buys the delinquent account from Aaron do?
A. Collect the entire amount owed and return it to Aaron.
B. Sell it back to Aaron after collecting the entire amount owed.
C. Collect the entire amount owed and keep all the money it obtains.
D. Take mild actions and collect a token amount.
Q:
Which of the following reconciles the net increase or decrease with the beginning cash balance and the ending cash balance?
A. Net effect of foreign exchange rates
B. Noncash investing and financing
C. Net change in cash balance
D. Noncash operating activities
Q:
Activities through which cash is obtained from and paid to lenders, owners, and investors are called _____ activities.
A. operating
B. investing
C. financing
D. marketing
Q:
_____ activities include the acquisition and disposal of property, plant, equipment, and investment securities of other firms.
A. Operating
B. Investing
C. Financing
D. Marketing
Q:
Activities involved in producing and selling goods and services are called _____ activities.
A. operating
B. investing
C. financing
D. marketing
Q:
Which of the following statements is true regarding the balance sheet?
A. It is rarely useful to the owners and managers of businesses.
B. It contains an exhaustive list of a business's assets and liabilities.
C. It always contains exact amounts.
D. it's values are considered as historical values.
Q:
Which of the following is more indicative of a business's financial strength?
A. Short-term investments
B. Prepaid expenses
C. Accounts payable
D. Inventories
Q:
_____ refers to the ability of a business to survive adverse financial events.
A. Liquidity
B. Financial flexibility
C. Financial strength
D. Profitability
Q:
The rule of thumb for evaluating current ratio is that the minimum acceptable ratio is:
A. 3.0.
B. 1.0.
C. 2.0.
D. 4.0.
Q:
_____ is an indicator of the business's ability to manage cash flows so that the company has the fiscal ability to respond appropriately if an unexpected opportunity or problem arises.
A. Liquidity
B. Financial flexibility
C. Absorbability
D. Equitability
Q:
The value of current assets divided by current liabilities is called:
A. inventory turnover ratio.
B. current ratio.
C. total assets to total liabilities ratio.
D. current equity ratio.
Q:
Which of the following ratios is used to estimate the liquidity of a business?
A. Inventory turnover ratio
B. Total assets to total liabilities ratio
C. Current ratio
D. Quick ratio
Q:
_____ is a measure of how quickly a company can raise money through internal sources by converting assets to cash.
A. Absorbability
B. Equitability
C. Nominal value
D. Liquidity
Q:
Which of the following is a statement of what a business owns, what it owes to others, and how much value the owners have invested in it?
A. Income statement
B. Balance sheet
C. Cash flow statement
D. Statement of retained earnings
Q:
Lenders use operating income as:
A. a measure of how well management achieved sales.
B. an indication of future sales.
C. a measure of how much debt a business can support.
D. an indication of a business's ability to control costs.
Q:
_____ is the most used item on the income statement.
A. Net income
B. Cost of sale
C. Revenue
D. Operating income
Q:
Which of the following is a difficulty that arises in understanding and interpreting the income statements?
A. There is difficulty deciding whether to report the revenues.
B. There is difficulty deciding what should be considered as expenses.
C. There are disputes over when to recognize revenues.
D. There are disputes over the preferred tax rate to incorporate.
Q:
Which of the following statements lists revenues and expenses and shows the amount of profit a business makes for a specified period of time?
A. Balance sheet
B. Statement of retained earnings
C. Income statement
D. Cash flow statement
Q:
Which of the following concepts assume that information flows from the income statement through the statement of retained earnings, the statement of owners' equity to the balance sheet?
A. Articulate concept
B. Going concern concept
C. Opportunity cost concept
D. Leveraging concept
Q:
The sum of all profits and losses, less all dividends paid since the beginning of the business is called:
A. liabilities.
B. retained earnings.
C. net income.
D. tax liability.
Q:
Which of the following is true of financial statements?
A. The customization of financial reports is illegal in all states.
B. The overall content and form of financial statements have been made standard by long usage.
C. Bankers and investors are typically new and unacquainted with standard financial statements.
D. The differences unique to each industry cannot be represented accurately in financial statements.
Q:
Formal summaries of the content of an accounting system's records of transactions are called _____.
A. financial securities
B. financial instruments
C. financial statements
D. financial derivatives
Q:
Which of the following accounting functions has been accurately described?
A. Investments records help produce accurate billing of customers, and thus help to maintain good customer relations.
B. Payroll records track if your business keeps surplus cash invested in securities.
C. Accounts payable records help to make timely payments in order to capture prompt pay discounts and to maintain a good credit rating for the business.
D. Credit card sales function enables that payroll and employment taxes are kept current.
Q:
Which of the following is a correct representation of typical accounting functions?
A. Credit card sales function helps to ensure that payroll and employment taxes are kept current.
B. Accurate and timely accounts receivable records are essential for making decisions concerning the extension of credit.
C. Leasehold records help to ease the problems of keeping necessary insurance coverage current and in force.
D. Insurance register helps to track the amount of discount and charge backs taken by your credit card provider.
Q:
Which of the following is true of typical accounting functions used in businesses?
A. Inventory accounting facilitates maintenance of appropriate levels of inventory and aids in calculation of appropriate stocking and reorder levels.
B. Fixed assets record the improvements to leased property or equipment made by the business.
C. Payroll records automatically calculate and accumulate depreciation.
D. Accounts receivable records track what one owes and helps to make timely payments.
Q:
Which of the following accounting functions aids in calculation of appropriate stocking and reorder levels?
A. Insurance register
B. Investment records
C. Inventory accounting
D. Payroll records
Q:
In the context of accounting functions, which of the following is true of accounts receivable?
A. It tracks what one owes and helps to make timely payments.
B. It is independent of the extension of credit.
C. It records all checks written and payments made.
D. It records provision of credit to customers.
Q:
Which of the following accounting functions focuses the most on automatically calculating and accumulating depreciation?
A. Credit card sales
B. Fixed asset accounting
C. Payroll records
D. Accounts receivable records
Q:
Accurate and timely _____ are essential for making decisions concerning the extension of credit. They also help produce accurate billing of customers, and thus help to maintain good customer relations.
A. payroll records
B. leasehold records
C. accounts payable records
D. accounts receivable records
Q:
Which of the following accounting functions ensures that the employment taxes are kept current?
A. Leasehold records
B. Investments records
C. Payroll records
D. Accounts receivable records
Q:
Which of the following is a feature that a chosen accounting system should have?
A. It should facilitate the development of a cash budget.
B. It should limit the production of custom reports that meet management needs.
C. It should show the financial position of the business only after elaborate processing.
D. It should have a limited context-independent help function.
Q:
Regular and systematic reduction in income that transfers asset value to expense over time is called _____.
A. appreciation
B. contribution margin
C. depreciation
D. benchmarking
Q:
Which of the following is a disadvantage of a computerized accounting system?
A. It makes the accounting process complicated and extensive.
B. It produces financial reports that meet legal requirements.
C. It reduces the accuracy of the accounting information.
D. It makes the process of error checking complicated.
Q:
Which of the following is a reason for a business to do accounting?
A. To make it difficult for information to be evaluated by others
B. To help managers bypass legal or contractual requirements
C. To produce information that is useful for managing a business
D. To make inaccurate information pass off as relevant and useful
Q:
The difference between assets and liabilities of a business is called its:
A. net income.
B. owners' equity.
C. cost of capital.
D. current ratio.
Q:
Which of the following is true of accounting equation?
A. It is used to place records into understandable categories that are useful for managing a business.
B. It assumes that a successful business will stay in business and this enables long-range planning and strategy.
C. It underlies the legal forms of establishing businesses, such as corporations, limited partnerships, and limited liability companies.
D. It ensures that accounting information is useful to the firm's stakeholders.
Q:
Legal obligations to give up things of value in the future are known as _____.
A. assets
B. borrowings
C. liabilities
D. owners' equity
Q:
Larry owns a successful business called Super Car-Hire. He plans to sell it to Bob. Bob assumes that he can keep up the high revenues if he can plan and execute the mission of the business well. Which of the following basic accounting concepts is reflected in Bob's assumption?
A. The business entity idea
B. The going concern expectation
C. The accounting equation
D. The revenue and expense premise
Q:
Juan has an accounting philosophy according to which he keeps the loans borrowed from the business separate from the loans he takes from banks for his own purposes. Which of the following basic accounting concepts is reflected in Juan's accounting philosophy?
A. The business entity idea
B. The going concern expectation
C. The accounting equation
D. The revenue and expense premise
Q:
The "going concern" concept states that:
A. a business has an existence that is separate from its owner.
B. accounting information must be useful to the owners and managers of businesses.
C. the premise of revenue and expense are a part of business.
D. a successful business will stay in business.
Q:
The "business entity" concept of accounting indicates that:
A. a successful business will stay in business.
B. assets = liabilities + owners' equity.
C. a business has an existence that is separate from its owner.
D. accounting information must be useful to the owners and managers of businesses.
Q:
Which of the following does the accounting equation state?
A. Revenue = Expense
B. Assets = Liabilities + Owners' Equity
C. Liabilities = Owners' Equity
D. Net income = Long-term Liabilities
Q:
Financial accounting is primarily intended for:
A. bankers, investors, and regulators.
B. calculating and reporting taxes.
C. predicting the results of management decisions.
D. avoiding penalties for noncompliance.
Q:
Which of the following is true of managerial accounting?
A. It is used to produce tax returns and schedules.
B. It is a rule-based system intended primarily for absentee owners.
C. It is forward-looking in nature.
D. It is primarily for bankers, investors, and regulators.
Q:
_____ is an accounting approach based on specific accounting requirements set by governmental taxing agencies.
A. Tax accounting
B. Managerial accounting
C. Benchmarking
D. Forensic accounting
Q:
_____ is a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators.
A. Tax accounting
B. Managerial accounting
C. Financial accounting
D. Forensic accounting
Q:
An accounting method that is specifically intended to be used for planning, directing, and controlling a business is called:
A. tax accounting.
B. managerial accounting.
C. benchmarking.
D. forensic accounting.
Q:
By limiting the information about financial concerns, the complexity of managerial accounting has been increased.
Q:
Variance analysis is the process of determining the effect of price and quantity changes on revenues and expenses.
Q:
Budgeted income statements are always created on a monthly format.
Q:
The cost of goods sold budget shows the predicted cost of product actually sold during the accounting period.
Q:
The first step in budgeting is to make a forecast of your future sales.
Q:
Variable costs decrease if output increases.
Q:
Expendables are necessarily fixed costs.
Q:
Cash flow statements can be either direct statements or indirect statements.
Q:
Financial flexibility of a business is a matter of judgment, whereas financial strength is an objective assessment.
Q:
Liquidity is a measure of the ability of a business to meet both short-term and long-term obligations.
Q:
Statement of cash flows is also referred to as the statement of financial position.
Q:
One of the difficulties in understanding and interpreting the income statements is the dispute over when one should recognize revenues.
Q:
The usefulness of the income statement for managing a small business is related to the amount of detail available in the statement.
Q:
Payroll records ensure that employment taxes are kept current.
Q:
The primary reason to acquire and use a computerized accounting system in your business is to ensure the accuracy of your accounting information.
Q:
Expenses are the value given up to obtain something that the owner wants.
Q:
The accounting equation is simply stated as Assets = Liabilities - Owners' Equity.
Q:
Financial accounting is forward-looking and attempts to predict the results of management decisions.
Q:
One reason why accounting is important to a small business is that it shows how much your business is worth.
Q:
What are some of the common management decisions that can be aided by the use of accounting information and procedures? Explain.
Q:
(p. 435; 437; 440) Briefly discuss the different types of budgets that make up the master budget.
Q:
What are the limitations of a balance sheet?
Q:
(p. 421; 423) Define the terms liquidity, financial flexibility, and financial strength. Explain the difference between financial flexibility and financial strength.
Q:
(p. 418; 421) Differentiate between income statement and balance sheet.
Q:
What are some of the tasks an accounting system should be able to perform in order to ensure that a business's accounting information is accurate, reliable, and useful?
Q:
Identify and briefly describe the five basic accounting concepts.
Q:
Is accounting important to small businesses? Explain.
Q:
The decision rule for an NPV analysis is to accept:
A. the smallest negative NPV.
B. the largest negative NPV.
C. the NPV closest to zero.
D. the largest positive NPV.
Q:
To perform _____ analyses, only cash flows are considered.
A. benchmarking
B. net present value
C. cost-benefit
D. SWOT
Q:
A(n) _____ analysis is a simplification methodology used to reduce the magnitude and complexity of the information that must be considered in making an appropriate decision when choosing from among investment alternatives.
A. SWOT
B. time-series
C. auditor's report
D. net present value
Q:
Which of the following is true of the differential revenues and expenses method?
A. It is used to increase the magnitude and complexity of the information that must be considered in making an appropriate investment decision.
B. It is estimated by only using cash flows.
C. It is based on the concept that a dollar to be received right now has more value than does a dollar to be received at some time in the future.
D. It comprises of estimating the changes in revenues and expenses from current operating results that will occur if an alternative is chosen.