Question 1

The calculation revenue minus cost of goods sold will give the firm its:

Accepted Answer

A)  retained earnings.
B)  fundamental accounting equation.
C)  gross margin.
D)  net income.E) None of the above
F) B) and C)

Question 2

Churches,schools,and charitable organizations all hire accountants.

Accepted Answer

A) True 
 B)False

Question 3

Purchasing insurance,paying employees,and using supplies are all examples of financial transactions.

Accepted Answer

A) True 
 B)False

Question 4

Today's computerized accounting programs are:

Accepted Answer

A)  very helpful for small business owners who lack strong accounting support within their companies.
B)  too expensive for most small businesses.
C)  easily affordable,but seldom necessary for the simple needs of the typical small business.
D)  so sophisticated that they can make most financial decisions without the aid of an accountant.E) A) and D)
F) None of the above

Question 5

If total liabilities were subtracted from total assets,the residual value would be:

Accepted Answer

A)  revenues.
B)  owners' equity.
C)  current assets.
D)  current expenses.E) B) and C)
F) A) and B)

Question 6

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Accepted Answer

A) True 
 B)False

Question 7

In addition to the mechanical tasks of recording and classifying accounting information,the best accounting software programs currently available for small businesses have the ability to make financial decisions,thus eliminating the need for owners of small businesses to consult with accountants.

Accepted Answer

A) True 
 B)False

Question 8

A cash flow statement reports cash receipts and disbursements for a firm that result:

Accepted Answer

A)  only from its operations.
B)  only from its investments.
C)  from both its operations and investments,but not from its financing.
D)  from its operations,investments and financing.E) None of the above
F) All of the above

Question 9

Once a trial balance has been prepared,the next step of the accounting cycle involves:

Accepted Answer

A)  posting the information to the correct ledger accounts.
B)  completing ratio analysis.
C)  preparing major financial statements such as the balance sheet.
D)  classifying the transactions into logical categories.E) B) and C)
F) C) and D)

Question 10

Financial accounting information about a firm is useful:

Accepted Answer

A)  only to managers within the firm.
B)  only to creditors and stockholders of the firm.
C)  only to the tax authorities and other government agencies that regulate the firm.
D)  to managers,owners,creditors,employees,and the government.E) A) and B)
F) A) and C)

Question 11

A(n) ___________ is an evaluation and unbiased opinion of the accuracy of a firm's financial statements.

Accepted Answer

A)  internal audit
B)  annual report
C)  independent audit
D)  certified auditE) All of the above
F) None of the above

Question 12

In trying to evaluate the management of inventory you could calculate the inventory turnover ratio and compare that ratio to the industry average.You would conclude that inventory could be managed better if

Accepted Answer

A)  the company's inventory turnover was higher than the industry's.
B)  the company's inventory turnover was lower than the industry's.
C)  cost of goods sold for the company was higher than the industry's average.
D)  cost of goods sold for the company was lower than the industry's average.E) B) and D)
F) B) and C)

Question 13

An income statement will present the net income (or net loss)of a firm resulting from the operations of the organization over a period of time.

Accepted Answer

A) True 
 B)False

Question 14

Because each business is unique,the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Accepted Answer

A) True 
 B)False

Question 15

In order to calculate the current ratio for your firm,you would divide current assets by:

Accepted Answer

A)  earnings per share.
B)  current liabilities.
C)  owners' equity.
D)  cost of goods sold.E) B) and C)
F) A) and B)

Question 16

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information that Martha and her group will follow most closely will be provided by certified public accountants.

Accepted Answer

A) True 
 B)False

Question 17

To effectively run a business,it is necessary to:

Accepted Answer

A)  hire a full-time accountant.
B)  use a public accounting firm.
C)  understand and use accounting information.
D)  know the differences between accounting and bookkeeping.E) B) and C)
F) A) and B)

Question 18

The most liquid asset is:

Accepted Answer

A)  sales.
B)  cash.
C)  accounts payable.
D)  owners' equity.E) B) and C)
F) B) and D)

Question 19

The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements.

Accepted Answer

A) True 
 B)False

Question 20

The "bottom line" of an income statement shows the firm's:

Accepted Answer

A)  retained earnings.
B)  gross margin.
C)  net income or net loss.
D)  owners' equity.E) A) and B)
F) None of the above

Exam 16: Understanding Accounting and Financial Information

The most liquid asset is:

Correct AnswerverifiedShow Answer

The calculation revenue minus cost of goods sold will give the firm its:

Correct AnswerverifiedShow Answer

In order to calculate the current ratio for your firm,you would divide current assets by:

Correct AnswerverifiedShow Answer

Once a trial balance has been prepared,the next step of the accounting cycle involves:

Correct AnswerverifiedShow Answer

Today's computerized accounting programs are:

Correct AnswerverifiedShow Answer

Financial accounting information about a firm is useful:

Correct AnswerverifiedShow Answer

To effectively run a business,it is necessary to:

Correct AnswerverifiedShow Answer

A(n) ___________ is an evaluation and unbiased opinion of the accuracy of a firm's financial statements.

Correct AnswerverifiedShow Answer

In trying to evaluate the management of inventory you could calculate the inventory turnover ratio and compare that ratio to the industry average.You would conclude that inventory could be managed better if

Correct AnswerverifiedShow Answer

The "bottom line" of an income statement shows the firm's:

Correct AnswerverifiedShow Answer

Churches,schools,and charitable organizations all hire accountants.

Correct AnswerverifiedShow Answer

The accounting cycle usually involves the work of both the bookkeeper and the accountant.

Correct AnswerverifiedShow Answer

Because each business is unique,the accounting profession recognizes that the accounting principles followed by one company may need to be completely different from the accounting principles followed by another firm.

Correct AnswerverifiedShow Answer

Martha is a member of a conservative political group that wants to identify and publicize examples of wasteful government spending.The type of accounting information that Martha and her group will follow most closely will be provided by certified public accountants.

Correct AnswerverifiedShow Answer

If total liabilities were subtracted from total assets,the residual value would be:

Correct AnswerverifiedShow Answer

Purchasing insurance,paying employees,and using supplies are all examples of financial transactions.

Correct AnswerverifiedShow Answer

The accounting cycle is a six-step procedure that results in the preparation and analysis of major financial statements.

Correct AnswerverifiedShow Answer

In addition to the mechanical tasks of recording and classifying accounting information,the best accounting software programs currently available for small businesses have the ability to make financial decisions,thus eliminating the need for owners of small businesses to consult with accountants.

Correct AnswerverifiedShow Answer

A cash flow statement reports cash receipts and disbursements for a firm that result:

Correct AnswerverifiedShow Answer

An income statement will present the net income (or net loss)of a firm resulting from the operations of the organization over a period of time.

Correct AnswerverifiedShow Answer

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