101 test bank for financial accounting 15th edition

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101 Test Bank for Financial Accounting 15th Edition

Public accounting is the segment of the profession where

professionals offer audit, tax, and consulting services to

The Code of Ethics of the AICPA calls for a commitment to

ethical behavior but not at the sacrifice of personal advantage

1. True

2 False

The CPA examination is administered by the General

Accounting Office of the U S Government

1. True

2 False

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

1. True

2 False

Management accounting information is oriented toward the future while financial accounting information is historical in nature

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

The Public Company Accounting Oversight Board is

responsible for creating and promoting International Financial Reporting Standards

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

Management accounting refers to the preparation and use of accounting information designed to meet the needs of decision makers outside the business organization.

Financial accounting standards issued by the FASB are

considered generally accepted accounting principles

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

The internal control structure of an organization has no

relationship to the reliability of accounting information

1. True

2 False

The content of management accounting reports needs to be presented in conformity with generally accepted accounting principles

Investors are individuals and other enterprises that have

provided equity to the reporting enterprise

1. True

2 False

Multiple Choice Questions-Page 1

The financial statements of a business entity:

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

Which financial statement is prepared as of a specific date?

1. A The balance sheet

2 B The income statement

3 C The statement of cash flows

4 D The balance sheet, income statement, and statement of cash flows are all for a period of time rather than at a specific date

The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner are collectively referred to as:

1. A Generally accepted accounting principles

2 B Financial accounting standards

3 C Securities and exchange regulations

4 D The internal control structure

Generally accepted accounting principles:

1. A Are based on official decrees only

2 B Are based on tradition only

3 C Are based on an accountant's experience only

4 D May change over time

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

Financial statements are designed primarily to:

1. A Provide managers with detailed information tailored to the managers' specific information needs

2 B Provide people outside the business organization with information about the

company's financial position and operating results

3 C Report to the Internal Revenue Service the company's taxable income

4 D Indicate to investors in a particular company the current market values of their investments

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

called:

1. A Internal control

2 B Financial integrity

3 C Corporate governance

4 D The audit function

Which of the following is a characteristic of financial accounting information?

1. A Its preparation requires judgment

2 B It is more about the future than it is about the past.

3 C None of it is based on estimates, assumptions, and judgments

4 D Notes and explanations from management are not included

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

1. A Financial forecasts

2 B Cost accounting

3 C Internal audits

4 D Audited financial statements

The body created by the Sarbanes Oxley Act and charged with oversight of the accounting profession is the:

1. A Public Company Accounting Oversight Board

2 B Auditing Standards Board

3 C International Accounting Standards Board

4 D Security and Exchange Commission

A complete set of financial statements for Citywide Company, at December 31, 2009, would include each of the following,

except:

1. A Balance sheet as of December 31, 2009

2 B Income statement for the year ended December 31, 2009

3 C Statement of projected cash flows for 2009

4 D Notes containing additional information that is useful in interpreting the financial statements

The Sarbanes-Oxley Act of 2002 created:

1. A The Security and Exchange Commission

2 B The Financial Accounting Standards Board

3 C The Public Company Accounting Oversight Board.

4 D The Income Tax Return Overview Board

Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the informational needs of:

1. A Investors and creditors

2 B Government agencies such as the Internal Revenue Service

3 C Customers

4 D Trade associations and labor unions

A strong internal control structure:

1. A Contributes to the accuracy and reliability of the accounting records

2 B Will prevent a business from operating at a loss

3 C Assures that a business will remain solvent

4 D Will prevent fraud, theft, and embezzlement

Financial accounting information is:

1. A Designed to assist investors and creditors

2 B Not used by managers and in income tax returns

3 C Called "special-purpose" accounting information

4 D Not applicable to individuals

Which organization best serves the professional needs of a CPA?

1. A FASB

2 B AICPA

3 C SEC

4 D AAA

The general purpose financial statements prepared annually by

a corporation would not include the:

1. A Balance sheet

2 B Income tax return

3 C Income statement

4 D Statement of cash flows

Which of the following is considered a return "on" investment?

The basic purpose of bookkeeping is to:

1. A Provide financial information about an economic entity

2 B Develop the types of information best-suited to specific managerial decisions

3 C Record the financial transactions of an economic entity

4 D Determine the taxable income of individuals and business entities

Financial statements are prepared:

1. A Only for publicly owned business organizations

2 B For corporations, but not for sole proprietorships or partnerships

3 C Primarily for the benefit of persons outside of the business organization

4 D In either monetary or nonmonetary terms, depending upon the need of the decision maker.

Information is cost effective when:

1. A The information aids management in controlling costs

2 B The information is based upon historical costs, rather than upon estimated market values

3 C The value of the information exceeds the cost of producing it

4 D The information is generated by a computer based accounting system

Which of the following is not a basic function of an accounting system?

1. A To interpret and record the effects of business transactions

2 B To classify the effects of similar transactions in a manner that permits determination

of various totals and subtotals useful to management

3 C To ensure that a business organization will be managed profitably

4 D To summarize and communicate information to decision makers

The principal difference between management accounting and financial accounting is that financial accounting information is:

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

4 Certified Management Accountants

5 D Oriented toward measuring solvency rather than profitability

Investors may be described as:

1. A Individuals and enterprises that have provided credit to a reporting entity

2 B Individuals and enterprises that own a reporting entity business

3 C Anyone that has an interest in the results of the operations of the reporting entity.

4 D Those whose primary economic activity consists of buying and selling stocks and bonds

Which of the following decision makers is least likely to be

among the users of management accounting reports developed

by Sears Roebuck and Co.?

1. A The chief executive officer of Sears

2 B The manager of the Automotive Department in a Sears' store

3 C The manager of a mutual fund considering investing in Sears' common stock

4 D Internal auditors within the Sears organization

Which of the following events is not a transaction that would be recorded in a company's accounting records?

1. A The purchase of equipment for cash

2 B The purchase of equipment on account

3 C The investment of additional cash in the business by the owner

4 D The death of a key executive

The FASB takes on a responsibility to do the following, except:

1. A Set the objectives of financial reporting

2 B Describe the elements of financial statements

3 C Judge disputes between management and the CPA

4 D Determine the criteria for deciding what information to include in financial

statements

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time?

1. A The balance sheet

2 B The income statement

3 C The statement of cash flows.

4 D All three statements are concerned with the financial position of a business at a particular time

The field of accounting may best be described as:

1. A Recording the financial transactions of an economic entity

2 B Developing information in conformity with generally accepted accounting principles

3 C The art of interpreting, measuring, and describing economic activity

4 D Developing the information required for the preparation of income tax returns

Financial statements must be prepared for which time period?

1. A One year

2 B Less than one year

3 C More than one year

4 D Any time period

Which of the following is generally not considered an external user of accounting information?

1. A Stockholders of a corporation

2 B Bank lending officers

3 C Financial analysts

4 D Factory managers

The basic purpose of an audit is to:

1. A Assure financial statements are in conformity with GAAP

2 B Provide as much useful information to decision makers as possible, regardless of cost

3 C Record changes in the financial position of an organization by applying the concepts

of double entry accounting

4 D Meet an organization's need for accounting information as efficiently as possible

69 Free Test Bank for Financial Accounting 15th Edition

by Williams Multiple Choice Questions-Page 2

The Financial Accounting Standards Board is:

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 issues Statements that represent authoritative expressions of 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

Which of the following has the least impact upon the reliability

of financial statements issued by publicly owned corporations?

1. A Federal securities laws

2 B Professional judgment of the accountants who prepare the financial statements

3 C Audits of the financial statements by the Internal Revenue Service

4 D Competence and integrity of the CPAs who perform audits

Characteristics of internal accounting information include all of the following except:

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

The auditor's report on the published financial statements of a large corporation should be viewed as:

1. A The opinion of independent experts as to the overall fairness of the statements

2 B The opinion of the corporation's chief accountant as to the overall fairness of the statements

3 C A guarantee by a firm of certified public accountants that the statements are

3 C Statement of financial position

4 D Statement of cash flows

The best definition of an accounting system is:

1. A Journals, ledgers, and worksheets

2 B Manual or computer-based records used in developing information about an entity for use by managers and also persons outside the organization

3 C The personnel, procedures, devices, and records used by an entity to develop accounting information and communicate this information to decision makers

4 D The concepts, principles, and standards specifying the information which should be included in financial statements, and how that information should be presented

In the phrase "generally accepted accounting principles," the words generally accepted mean that the principles:

1. A Have been adopted by Congress or approved by the voters in a general election

2 B Are acceptable to the Internal Revenue Service

3 C Are understood and observed by all the participants in the financial reporting process

4 D Have been approved by a majority of the members of the Financial Accounting Standards Board

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

1. A Institutional factors, such as standards for preparing information

2 B Professional organizations, such as the American Institute of CPAs

3 C Competence, judgment, and ethical behavior of individual accountants

4 D The cost of preparing the financial information

Which of the following are not considered "external" users of financial statements?

1. A The Financial Accounting Standards Board

2 B Certified public accountants

3 C The Securities and Exchange Commission

4 D The Internal Revenue Service

Generally accepted accounting principles are the "ground

rules" used in the preparation of:

1. A Income tax returns

2 B All accounting reports

3 C Reports to federal and state regulatory agencies

4 D Financial statements