Question 1

One purpose of generally accepted accounting principles is to make accounting information prepared by different companies more comparable.

Accepted Answer

A) True 
 B)False

Question 2

The statement of financial position and the income statement are one and the same.

Accepted Answer

A) True 
 B)False

Question 3

Generally accepted accounting principles were established by the American Accounting Association in 1934 and are updated annually by Congress.

Accepted Answer

A) True 
 B)False

Question 4

All of the following are characteristics of management accounting, except:

Accepted Answer

A)  Reports are used primarily by insiders rather than by persons outside of the business entity. 
B)  Its purpose is to assist managers in planning and controlling business operations. 
C)  Information must be developed in conformity with generally accepted accounting principles or with income tax regulations. 
D)  Information may be tailored to assist in specific management decisions. 
A)  Reports are used primarily by insiders rather than by persons outside of the business entity. 
B)  Its purpose is to assist managers in planning and controlling business operations. 
C)  Information must be developed in conformity with generally accepted accounting principles or with income tax regulations. 
D)  Information may be tailored to assist in specific management decisions.

Question 5

Financial accounting information is:

Accepted Answer

A)  Designed to assist investors and creditors. 
B)  Not used by managers and in income tax returns. 
C)  Called "special-purpose" accounting information. 
D)  Not applicable to individuals. 
A)  Designed to assist investors and creditors. 
B)  Not used by managers and in income tax returns. 
C)  Called "special-purpose" accounting information. 
D)  Not applicable to individuals.

Question 6

A strong internal control structure:

Accepted Answer

A)  Contributes to the accuracy and reliability of the accounting records. 
B)  Will prevent a business from operating at a loss. 
C)  Assures that a business will remain solvent. 
D)  Will prevent fraud, theft, and embezzlement. 
A)  Contributes to the accuracy and reliability of the accounting records. 
B)  Will prevent a business from operating at a loss. 
C)  Assures that a business will remain solvent. 
D)  Will prevent fraud, theft, and embezzlement.

Question 7

Suppose a number of your friends have organized a company to develop and sell a new software product. They have asked you to loan them $7,000 to help get the company started, and have promised to repay your $7,000 plus 10% interest in one year. Of the following, which amount may be described as the return on your investment?

Accepted Answer

A)  $7,000. 
B)  $700. 
C)  $7,700. 
D)  Some other amount. 
A)  $7,000. 
B)  $700. 
C)  $7,700. 
D)  Some other amount.

Question 8

Generally accepted accounting principles are the "ground rules" used in the preparation of:

Accepted Answer

A)  Income tax returns. 
B)  All accounting reports. 
C)  Reports to federal and state regulatory agencies. 
D)  Financial statements. 
A)  Income tax returns. 
B)  All accounting reports. 
C)  Reports to federal and state regulatory agencies. 
D)  Financial statements.

Question 9

Which of the following is generally not considered one of the general purpose financial statements issued by a corporation?

Accepted Answer

A)  Income statement forecast for the coming year. 
B)  Balance sheet. 
C)  Statement of financial position. 
D)  Statement of cash flows. 
A)  Income statement forecast for the coming year. 
B)  Balance sheet. 
C)  Statement of financial position. 
D)  Statement of cash flows.

Question 10

The basic purpose of an audit is to:

Accepted Answer

A)  Assure financial statements are in conformity with GAAP. 
B)  Provide as much useful information to decision makers as possible, regardless of cost. 
C)  Record changes in the financial position of an organization by applying the concepts of double entry accounting. 
D)  Meet an organization's need for accounting information as efficiently as possible. 
A)  Assure financial statements are in conformity with GAAP. 
B)  Provide as much useful information to decision makers as possible, regardless of cost. 
C)  Record changes in the financial position of an organization by applying the concepts of double entry accounting. 
D)  Meet an organization's need for accounting information as efficiently as possible.

Question 11

Overseeing a company's affairs to ensure that the company is managed with the best interest of shareholders in mind is called:

Accepted Answer

A)  Internal control. 
B)  Financial integrity. 
C)  Corporate governance. 
D)  The audit function. 
A)  Internal control. 
B)  Financial integrity. 
C)  Corporate governance. 
D)  The audit function.

Question 12

Which of the following is not an important factor in ensuring the integrity of accounting information?

Accepted Answer

A)  Institutional factors, such as standards for preparing information. 
B)  Professional organizations, such as the American Institute of CPAs. 
C)  Competence, judgment, and ethical behavior of individual accountants. 
D)  The cost of preparing the financial information. 
A)  Institutional factors, such as standards for preparing information. 
B)  Professional organizations, such as the American Institute of CPAs. 
C)  Competence, judgment, and ethical behavior of individual accountants. 
D)  The cost of preparing the financial information.

Question 13

The principal function of CPAs is to:

Accepted Answer

A)  Audit income tax returns to determine if taxpayers have underpaid their income taxes. 
B)  Conduct audits to determine whether the employees of a business are performing their jobs honestly and efficiently. 
C)  Advise individual investors on stock market investments. 
D)  Perform audits to determine the fairness and reliability of a company's financial statements. 
A)  Audit income tax returns to determine if taxpayers have underpaid their income taxes. 
B)  Conduct audits to determine whether the employees of a business are performing their jobs honestly and efficiently. 
C)  Advise individual investors on stock market investments. 
D)  Perform audits to determine the fairness and reliability of a company's financial statements.

Question 14

To increase its usefulness to investors and creditors, the information is usually accompanied by explanations from management.

Accepted Answer

The answer of To increase its usefulness to investors and...

Question 15

It is the function of management accounting to perform the following activities, except:

Accepted Answer

A)  Financial forecasts. 
B)  Cost accounting. 
C)  Internal audits. 
D)  Audited financial statements. 
A)  Financial forecasts. 
B)  Cost accounting. 
C)  Internal audits. 
D)  Audited financial statements.

Question 16

The work of accountants practicing in public accounting may best be described as:

Accepted Answer

A)  Providing various types of accounting services to a wide variety of clients. 
B)  Preparing income tax returns for individuals and small businesses. 
C)  Developing and interpreting information tailored to the needs of business managers. 
D)  Helping governmental agencies carry out their various regulatory responsibilities. 
A)  Providing various types of accounting services to a wide variety of clients. 
B)  Preparing income tax returns for individuals and small businesses. 
C)  Developing and interpreting information tailored to the needs of business managers. 
D)  Helping governmental agencies carry out their various regulatory responsibilities.

Question 17

Information is cost effective when:

Accepted Answer

A)  The information aids management in controlling costs. 
B)  The information is based upon historical costs, rather than upon estimated market values. 
C)  The value of the information exceeds the cost of producing it. 
D)  The information is generated by a computer based accounting system. 
A)  The information aids management in controlling costs. 
B)  The information is based upon historical costs, rather than upon estimated market values. 
C)  The value of the information exceeds the cost of producing it. 
D)  The information is generated by a computer based accounting system.

Question 18

Users of accounting information
List seven groups that would typically use financial information.

Accepted Answer

1. Investors; 2. Cre

Question 19

Audits of financial statements are performed by:

Accepted Answer

A)  The controller of the reporting company. 
B)  The Financial Accounting Standards Board (FAS
B) . 
C)  The management of the reporting company. 
D)  Independent certified public accountants (CPAs). 
A)  The controller of the reporting company. 
B)  The Financial Accounting Standards Board (FAS
B) . 
C)  The management of the reporting company. 
D)  Independent certified public accountants (CPAs).

Question 20

The CPA examination is administered by the General Accounting Office of the U. S. Government.

Accepted Answer

A) True 
 B)False

Exam 1: Accounting: Information for Decision Making

One purpose of generally accepted accounting principles is to make accounting information prepared by different companies more comparable.

The statement of financial position and the income statement are one and the same.

Generally accepted accounting principles were established by the American Accounting Association in 1934 and are updated annually by Congress.

All of the following are characteristics of management accounting, except:

Financial accounting information is:

A strong internal control structure:

Generally accepted accounting principles are the "ground rules" used in the preparation of:

Which of the following is generally not considered one of the general purpose financial statements issued by a corporation?

The basic purpose of an audit is to:

Overseeing a company's affairs to ensure that the company is managed with the best interest of shareholders in mind is called:

Which of the following is not an important factor in ensuring the integrity of accounting information?

The principal function of CPAs is to:

To increase its usefulness to investors and creditors, the information is usually accompanied by explanations from management.

It is the function of management accounting to perform the following activities, except:

The work of accountants practicing in public accounting may best be described as:

Information is cost effective when:

Users of accounting information List seven groups that would typically use financial information.

Audits of financial statements are performed by:

The CPA examination is administered by the General Accounting Office of the U. S. Government.

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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