Question 1

40.Peter, an accountant, enters every transaction in the journal to reflect its impact on assets and its impact on liabilities and owners' equity. He is using

Accepted Answer

A)   a double-entry accounting system.
B)   a balance sheet.
C)   a financial ratio.
D)   breakeven analysis.
E)   a financial statement.F) A) and D)
G) B) and C)

Question 2

If a company needs cash for emergencies, it typically uses the money in retained earnings.

Accepted Answer

A) True 
 B)False

Question 3

According to the accounting equation, if assets equal $4000 and liabilities equal $1500, then owner's equity would equal

Accepted Answer

A)   $5500.
B)   $2500.
C)   $3500.
D)   $8000.
E)   It is not possible to tell with the information given.F) A) and C)
G) None of the above

Question 4

List the potential users of accounting information.

Accepted Answer

The potential users of account...

Question 5

John wants to determine gross profit for his company. To do so, he must subtract the cost of goods sold from gross sales revenue.

Accepted Answer

A) True 
 B)False

Question 6

David is an accountant who calls attention to problems and helps managers carry out the planning, decision making, and controlling functions. David is involved in ________ accounting.

Accepted Answer

A)   budgeting
B)   financial
C)   auditing
D)   managerial
E)   generally accepted accounting principlesF) D) and E)
G) A) and E)

Question 7

Which of the following is correct with regard to private accountants?

Accepted Answer

A)   They are hired by business firms who do not want to use the services of CPAs.
B)   They are employed by business firms in areas such as marketing research, law, and production technology.
C)   They are becoming less common as CPAs become more prominent and skilled.
D)   They are almost exclusively found at the head office of business firms.
E)   They are hired to deal with companies' day-to-day accounting needs.F) None of the above
G) All of the above

Question 8

Managerial accounting is

Accepted Answer

A)   a field of accounting that serves internal users of a company's financial information.
B)   the rules and procedures governing the content and form of financial reports.
C)   the field of accounting concerned with external users of a company's financial information.
D)   a systematic examination of a company's accounting system to determine whether its financial reports fairly represent its operations.
E)   a bookkeeping system that balances the accounting equation by recording the dual effects of every financial transaction.F) A) and E)
G) A) and D)

Question 9

If current assets are $10 000 and current liabilities are $5000, the current ratio is 0.5.

Accepted Answer

A) True 
 B)False

Question 10

Identify the profitability ratios and what they measure.

Accepted Answer

Profitability ratios give investors an i...

Question 11

Financial statements fall into three broad categories, which are

Accepted Answer

A)   debits, credits, and loans.
B)   income statements, balance sheets, and statements of cash flows.
C)   assets, liabilities, and owners' equity.
D)   cash, marketable securities, and goodwill.
E)   budgets, income statements, and profit-and-loss statements.F) A) and E)
G) A) and B)

Question 12

What is an income statement?

Accepted Answer

An income statement reports re...

Question 13

A forensic accountant is a special type of accountant who audits companies that have gone bankrupt.

Accepted Answer

A) True 
 B)False

Question 14

Liabilities reflected on the balance sheet are divided into two general categories: current (debts to be paid within one year) and long term (due more than a year into the future).

Accepted Answer

A) True 
 B)False

Question 15

What does return on equity measure?

Accepted Answer

A)   The amount of pre-tax profit earned for each dollar invested
B)   The amount of profit earned for each share of stock
C)   The amount of profit earned for each dollar of previous profit retained in the business
D)   The amount of profit earned for each dollar invested
E)   The amount of pre-tax profit earned for each share of stockF) B) and D)
G) A) and B)

Question 16

________ ratios give investors an idea of what returns they can expect on their investment; dividing ________ by total owners' equity is one such ratio.

Accepted Answer

A)   Profitability; earnings per share
B)   Long-term liquidity; net income
C)   Activity; average inventory
D)   Short-term liquidity; earnings per share
E)   Profitability; net incomeF) C) and E)
G) A) and B)

Question 17

Documents generated by the financial accounting system focus on the activities of the company as a whole, rather than on individual departments or divisions. By contrast, documents generated by the management accounting system focus on individual departments.

Accepted Answer

A) True 
 B)False

Question 18

What types of services did CAs, CGAs, and CMAs provide before the three groups merged? How will the merger change the situation?

Accepted Answer

Services include auditing (examination o...

Question 19

What do forensic accountants do?

Accepted Answer

Forensic accountants assist in the inves...

Question 20

A private accountant deals with a company's day-to-day activities.

Accepted Answer

A) True 
 B)False

Exam 11: Understanding Accounting

John wants to determine gross profit for his company. To do so, he must subtract the cost of goods sold from gross sales revenue.

Correct AnswerverifiedShow Answer

What do forensic accountants do?

Correct AnswerverifiedForensic accountants assist in the inves...View AnswerShow Answer

If current assets are $10 000 and current liabilities are $5000, the current ratio is 0.5.

Correct AnswerverifiedShow Answer

What types of services did CAs, CGAs, and CMAs provide before the three groups merged? How will the merger change the situation?

Correct AnswerverifiedServices include auditing (examination o...View AnswerShow Answer

________ ratios give investors an idea of what returns they can expect on their investment; dividing ________ by total owners' equity is one such ratio.

Correct AnswerverifiedShow Answer

If a company needs cash for emergencies, it typically uses the money in retained earnings.

Correct AnswerverifiedShow Answer

List the potential users of accounting information.

Correct AnswerverifiedThe potential users of account...View AnswerShow Answer

A private accountant deals with a company's day-to-day activities.

Correct AnswerverifiedShow Answer

What is an income statement?

Correct AnswerverifiedAn income statement reports re...View AnswerShow Answer

What does return on equity measure?

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Liabilities reflected on the balance sheet are divided into two general categories: current (debts to be paid within one year) and long term (due more than a year into the future).

Correct AnswerverifiedShow Answer

Which of the following is correct with regard to private accountants?

Correct AnswerverifiedShow Answer

Identify the profitability ratios and what they measure.

Correct AnswerverifiedProfitability ratios give investors an i...View AnswerShow Answer

40.Peter, an accountant, enters every transaction in the journal to reflect its impact on assets and its impact on liabilities and owners' equity. He is using

Correct AnswerverifiedShow Answer

A forensic accountant is a special type of accountant who audits companies that have gone bankrupt.

Correct AnswerverifiedShow Answer

According to the accounting equation, if assets equal $4000 and liabilities equal $1500, then owner's equity would equal

Correct AnswerverifiedShow Answer

David is an accountant who calls attention to problems and helps managers carry out the planning, decision making, and controlling functions. David is involved in ________ accounting.

Correct AnswerverifiedShow Answer

Financial statements fall into three broad categories, which are

Correct AnswerverifiedShow Answer

Managerial accounting is

Correct AnswerverifiedShow Answer

Documents generated by the financial accounting system focus on the activities of the company as a whole, rather than on individual departments or divisions. By contrast, documents generated by the management accounting system focus on individual departments.

Correct AnswerverifiedShow Answer

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Forensic accountants assist in the inves...
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Services include auditing (examination o...
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ratios give investors an idea of what returns they can expect on their investment; dividing by total owners' equity is one such ratio.

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The potential users of account...
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An income statement reports re...
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Profitability ratios give investors an i...
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