Test bank for financial accounting 15th edition part 1 by williams

The annual financial statements of large corporations such as Microsoft or PepsiCo need not be audited by independent certified public accountants, since these firms maintain large accou

Test Bank for Financial Accounting 15th Edition Part 1 by Williams

Managerial accounting information is designed primarily to assist investors and creditors in deciding how to allocate scarce resources

1 True

2 False

Return on investment is the same as return of investment

1 True

The annual financial statements of large corporations such as Microsoft or PepsiCo need not be audited by independent certified public accountants, since these firms maintain large accounting departments as part of their organizations

One purpose of generally accepted accounting principles is to make

accounting information prepared by different companies more

comparable

1 True

2 False

Today, the most authoritative source of generally accepted accounting

principles is the American Accounting Association

1 True

2 False

The American Institute of Certified Public Accountants has the legal authority over publicly held corporations to enforce compliance with 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

The Securities and Exchange Commission is instrumental in the development

of financial accounting standards

The Sarbanes-Oxley Act places responsibility on CEOs and CFOs of companies

to certify the fairness of company's financial statements The Act also created the Public Company Accounting Oversight Board which oversees the public accounting profession

The Public Company Accounting Oversight Board is responsible for creating and promoting International Financial Reporting Standards

1 True

2 False

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

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

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

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

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

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

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

Which of the following is not characteristic of financial accounting?

1 A Information used in financial statements is prepared in conformity with generally accepted accounting principles

2 B The information is confidential and is intended for use only by company management

3 C The information is used in a wide variety of business decisions

4 D The information is developed primarily by "private accountants" that is, accountants employed by business organizations

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 thedecision maker

It is the function of management accounting to perform the following

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,

The accounting systems of most business organizations:

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

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

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

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

Which of the following is generally not considered an external user 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

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 reportingentity

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

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

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 organization best serves the professional needs of a CPA?

1 A FASB

2 B AICPA

3 C SEC

4 D AAA

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 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

The designation of CPA is given by:

1 A Universities

2 B States

3 C The AICPA.

4 D The SEC

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

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 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

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

The principal difference between management accounting and financial

accounting is that financial accounting information is:

4 D Oriented toward measuring solvency rather than profitability

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

In comparison with a financial statement prepared in conformity with

generally accepted accounting principles, a management accounting report is more likely to:

1 A Be used by decision makers outside of the business organization

2 B Focus upon the operation results of the most recently completed

accounting period

3 C View the entire organization as the reporting entity

4 D Be tailored to the specific needs of an individual decision maker

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 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 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

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

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

1 A Dividends

2 B Repayment of a loan

3 C Purchase of an asset

4 D Securing a loan

The basic purpose of audited financial statements is to:

1 A Provide the reporting company with assurance that all assets are protectedfrom 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 reliable 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

Audits of financial statements are performed by:

1 A The controller of the reporting company

2 B The Financial Accounting Standards Board (FASB)

3 C The management of the reporting company

4 D Independent certified public accountants (CPAs)

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

4 D A guarantee by the Financial Statements Insurance Board that the

statements do not overstate assets or net income

The set of standards, assumptions, and concepts that form the "ground rules" for financial reporting in the United States is termed:

1 A The conceptual framework

2 B Generally accepted accounting principles

3 C Statements of Financial Accounting Concepts.

4 D American standards for certified public accountants

The basic purpose of generally accepted accounting principles is to:

1 A Minimize the possibility of a business becoming insolvent

2 B Provide a framework for financial reporting that is understood by both the preparers and the users of financial statements

3 C Ensure that financial statements include the type of information that is best suited to every type of business decision

4 D Eliminate the need for professional judgment in preparing financial

statements

Generally accepted accounting principles are intended to assist accountants

in preparing financial statements that:

1 A Are relevant, reliable, comparable, and understandable

2 B Show the business to be both solvent and profitable

3 C Comply with all income tax rules and regulations

4 D Are ideally suited to the specific needs of each user of the financial

statements

Which of the following is not an objective of generally accepted accounting principles?

1 A To minimize the amount of income taxes owed

2 B To ensure that both preparers and users of financial statements understandthe concepts and assumptions used in presenting information within these statements

3 C To enhance the relevance and reliability of information contained in

financial statements

4 D To increase the comparability of financial statements prepared by different companies.

In the phrase "generally accepted accounting principles," the words

accounting principles refers to:

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 StandardsBoard (FASB)

Which of the following is not considered a return "of" investment?

1 A Certified principles of accounting (CPA)

2 B Generally accepted accounting principles (GAAP)

3 C Federal accounting standards and bylaws (FASB)

4 D Standards enforcing consistency (SEC)