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1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
External users of accounting information have a financial
interest in an entity but are not involved with the day-to-day
operations of the enterprise.
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
One purpose of generally accepted accounting principles is to
make accounting information prepared by different companies
more comparable.
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
An accounting practice can become a "generally accepted
accounting principle" through widespread use, even if the
practice is not mentioned in the official pronouncements of the
accounting standard-setting organizations.
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
1. True
2. False
Multiple Choice Questions - Page 1
Investors and creditors are interested in the probability that
their original investment or loan will eventually be returned, and
that they will receive a reasonable return while their funds are
invested or borrowed. These expectations are collectively
referred to as:
1. A. Expected profitability.
2. B. The objectives of financial reporting.
3. C. Cash flow prospects.
4. D. Financial position.
1. A. One year.
2. B. Less than one year.
3. C. More than one year.
4. D. Any time period.
1. A. Prepared by managers.
2. B. Intended primarily for use by decision makers outside the business organization.
3. C. Prepared in accordance with a set of accounting principles developed by the Institute
of Certified Management Accountants.
4. D. Oriented toward measuring solvency rather than profitability.
1. A. Balance sheet.
2. B. Income tax return.
3. C. Income statement.
4. D. Statement of cash flows.
1. A. Are tailored to meet the organization's needs for accounting information and the
resources available for operating the system.
2. B. Are similar in design to the journals, ledgers, and worksheets illustrated in this text.
3. C. Utilize data bases, rather than ledger accounts.
4. D. Are designed by the CPA firm that performs the annual financial audit.
The New York Stock Exchange and the NASDAQ both require all
listed companies to
1. A. Stockholders of a corporation.
2. B. Bank lending officers.
3. C. Financial analysts.
4. D. Factory managers.
1. A. Include the balance sheet, income statement, and income tax return.
2. B. Provide information about the cash flow prospects of the company.
3. C. Are the first step in the accounting process.
4. D. Are prepared for a fee by the Financial Accounting Standards Board.
1. A. Dividends.
2. B. Repayment of a loan.
3. C. Purchase of an asset.
4. D. Securing a loan.
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 $8,000 to help get the company started, and have
promised to repay your $8,000 plus 10% interest in one year. Of
the following, which amount may be described as the return on
your investment?
1. A. $8,000
2. B. $800
3. C. $8,800
4. D. $7,200
1. A. Owners.
2. B. Creditors.
3. C. Labor unions.
4. D. Managers.
Which financial statement is prepared as of a specific date?
1. A. Provide information useful in assessing amount, timing, and uncertainty of future cash
flows.
2. B. Provide information useful in making investment and credit decisions.
3. C. Provide information about economic resources, claims to resources, and changes in
resources and claims.
4. D. Provide information useful to help the enterprise achieve its goals, objectives, and
mission.
1. A. AICPA.
2. B. IASB.
3. C. SEC.
4. D. AAA.
1. A. It is historical in nature.
2. B. It results from inexact and approximate measures.
3. C. It is factual, so it does not require judgment to prepare.
4. D. It is enhanced by management's explanation.
Which of the following has the least impact upon the integrity of
financial statements issued by publicly owned corporations?
1. A. The standards, assumptions, and concepts that serve as "ground rules" for financial
reporting.
2. B. Ethical standards that prohibit fraudulent or misleading financial reporting.
3. C. The steps in the accounting cycle.
4. D. The accounting practices authorized by the Financial Accounting Standards Board
(FASB).
1. A. FASB.
2. B. AICPA.
3. C. SEC.
4. D. AAA.
The work of accountants practicing in public accounting may
best be described as:
1. A. The public.
2. B. The client.
3. C. Colleagues.
4. D. The IRS.
1. A. Universities.
2. B. States.
3. C. The AICPA.
4. D. The SEC.
1. A. Reports are used primarily by insiders rather than by persons outside of the business
entity.
2. B. Its purpose is to assist managers in planning and controlling business operations.
3. C. Information must be developed in conformity with generally accepted accounting
principles or with income tax regulations.
4. D. Information may be tailored to assist in specific managerial decisions.
1. A. Provide the reporting company with assurance that all assets are protected from theft
or embezzlement.
2. B. Prepare financial statements for companies that do not have their own accounting
departments.
3. C. Provide users of the financial statements with assurance that the statements are
verifiable and are presented in conformity with generally accepted accounting principles.
4. D. Provide both the reporting company and the users of the statements with a written
guarantee that the statements are error-free.
1. A. Audit income tax returns to determine if taxpayers have underpaid their income taxes.
2. B. Conduct audits to determine whether the employees of a business are performing
their jobs honestly and efficiently.
3. C. Advise individual investors on stock market investments.
4. D. Perform audits to determine the fairness of a company's financial statements.
1. A. It is audited by a CPA.
2. B. It must be timely.
3. C. It is oriented toward the future.
4. D. It measures efficiency and effectiveness.
1. A. Responsible for the review and audit of federal income tax returns.
2. B. Primarily concerned with the preparation of the annual federal budget.
3. C. A private group that conducts research and determines generally accepted
accounting principles.
4. D. A government agency with legal authority to approve or disapprove the financial
statements of corporations that sell their securities to the public.
1. A. Investors.
2. B. Managers.
3. C. Chief Financial Officer.
4. D. Chief Executive Officer.
1. A. Store manager
2. B. Chief executive officer
3. C. Creditor
4. D. Chief financial officer
1. A. Internal control.
2. B. Financial integrity.
3. C. Corporate governance.
4. D. The audit function.
1. A. Financial forecasts.
2. B. Cost accounting.
3. C. Internal audits.
4. D. Audited financial statements.
(1.) Provide information useful in making investment and credit decisions; (2.) Provide
information useful in assessing the amount, timing, and uncertainty of future cash
flows; (3.) Provide information about economic resources, claims to economic
resources, and changes in resources and claims.
To account for the use of long-lived equipment, estimates must be made of the lifetime
and scrap value of that equipment.
Financial and management accounting information. Explain one
way in which the characteristics of financial and management
accounting information differ.
Answer Given
(A.) Generally accepted accounting principles provide the framework for determining
what information is to be included in the financial statements and how that information
is to be presented; (B.) Financial Accounting Standards Board; Securities and
Exchange Commission; American Institute of CPAs; American Accounting
Association.