88 test bank for college accounting 2nd edition

88 Test Bank for College Accounting 2nd Edition
Multiple Choice Questions
Accounting software:
1.

A.Has replaced the need for accountants.

2.

B.Has not changed the work that accountants do.

3.

C.Has improved clerical accuracy.

4.

D.Has replaced the need for decision makers.

5.

E.Is only available to large corporations.

The committee that attempts to create more harmony among
the accounting practices of different countries by
identifying preferred practices and encouraging their
worldwide acceptance is the:
1.

A.AICPA.

2.

B.FASB.

3.

C.CAP.

4.

D.SEC.

5.

E.IASB.

Internal users of accounting information include:
1.

A.Shareholders.

2.

B.Managers.

3.

C.Lenders.

4.

D.Suppliers.

5.

E.Customers.

The primary objective of financial accounting is:
1.

A.To serve the decision-making needs of internal users.

2.

B.To provide financial statements to help external users analyze an organization's
activities.

3.

C.To monitor and control company activities.


4.

D.To provide information on both the costs and benefits of looking after products and
services.

5.

E.To know what, when, and how much to produce.

The private board that currently has the authority to establish
generally accepted accounting principles is the:
1.

A.APB.

2.

B.FASB.

3.

C.AAA.

4.

D.AICPA.

5.

E.SEC.

Career opportunities in accounting include:
1.

A.Budgeting.

2.

B.Auditing.

3.

C.Cost accounting.

4.

D.Internal Auditing.

5.

E.All of these.

Accounting is an information and measurement system that:
1.

A.Identifies business activities.

2.

B.Records business activities.

3.

C.Communicates business activities.

4.

D.Helps people make better decisions.

5.

E.All of these.

The International Accounting Standards Board (IASB)
1.

A.Hopes to create harmony among accounting practices of different countries.

2.

B.Is the government group that establishes reporting requirements for companies that
issue stock to the public.

3.

C.Has the authority to impose its standards on companies.

4.

D.Is the only source of generally accepted accounting principles (GAAP).

5.

E.Only applies to companies that are members of the European Union.


Accounting
1.

A.Is an information and measurement system.

2.

B.Identifies, records, and communicates information about business activities.

3.

C.Helps people make better decisions.

4.

D.Provides information about a company's performance.

5.

E.All of these.

External users of accounting information include:
1.

A.Shareholders.

2.

B.Customers.

3.

C.Creditors.

4.

D.Government regulators.

5.

E.All of these.

Career opportunities in accounting include:
1.

A.Auditing.

2.

B.Management consulting.

3.

C.Tax accounting.

4.

D.Cost accounting.

5.

E.All of these.

Ethics:
1.

A.Are beliefs that separate right from wrong.

2.

B.And law often coincide.

3.

C.Help to prevent conflicts of interest.

4.

D.Are critical in accounting.

5.

E.All of these.

The area of accounting aimed at serving the decision-making
needs of internal users is:
1.

A.Financial accounting.

2.

B.Managerial accounting.

3.

C.External auditing.


4.

D.SEC reporting.

5.

E.Bookkeeping.

The rules adopted by the accounting profession as guides in
preparing financial statements are:
1.

A.Comprised of both general and specific principles.

2.

B.Known as generally accepted accounting principles.

3.

C.Abbreviated as GAAP.

4.

D.Intended to make information in financial statements relevant, reliable, and
comparable.

5.

E.All of these.

Accounting certifications include the:
1.

A.Certified Public Accountant.

2.

B.Certified Management Accountant.

3.

C.Certified Internal Auditor.

4.

D.Certified Bookkeeper.

5.

E.All of these.

The financial statements prepared for external users is often

referred to as
1.

A.The books.

2.

B.Integrated financial statements.

3.

C.Statements of financial position.

4.

D.General purpose financial statements.

5.

E.Proforma financial statements.

A Certified Public Accountant.
1.

A.Must meet education and experience requirements.

2.

B.Must pass an examination.

3.

C.Must exhibit ethical character.

4.

D.May also be a Certified Management Accountant.

5.

E.All of these.


Ethical behavior:
1.

A.Requires that auditors' pay not depend on the figures in the client's reports.

2.

B.Encourages auditors to invest in businesses they audit.

3.

C.Does not affect external users.

4.

D.Is rarely an issue in business.

5.

E.All of these.

The board of directors report to
1.

A.Shareholders.

2.

B.Lenders.

3.

C.Management.

4.

D.SEC.

5.

E.All of these.

Generally accepted accounting principles:
1.

A.Are practices adopted by accountants to make accounting easier.

2.

B.Are only necessary when convenient.

3.

C.Can be overruled if approved by the SEC.

4.

D.Strive to make information relevant, reliable and comparable.

5.

E.None of these.

The organization responsible for overseeing the work of
external auditors is the:
1.

A.FASB.

2.

B.SEC.

3.

C.PCAOB.

4.

D.GAAP.

5.

E.AICPA.

In order to be useful, accounting information must be
1.

A.Reliable.

2.

B.Relevant.

3.

C.Conform to GAAP.


4.

D.Both a and b.

5.

E.All of these.

Rules adopted by the accounting profession to make
information relevant, reliable and comparable:
1.

A.Are comprised of both general and specific principles.

2.

B.Are known as generally accepted accounting principles.

3.

C.Are abbreviated as GAAP.

4.

D.Are established by FASB and SEC.

5.

E.All of these.

Examples of social responsibility include:
1.

A.Donating computers to a local elementary school.

2.

B.Enacting stricter production-pollution standards.

3.

C.Sponsoring a summer free-lunch program.

4.

D.Improving lighting in a production room.

5.

E.All of these.

True False Questions
Accounting information systems collect, process and report
information to decision makers.
1.

True

2.

False

The Financial Accounting Standards Board is the private group
that sets both broad and specific accounting principles.
1.

True

2.

False

Understanding generally accepted accounting principles is not
necessary to use and interpret financial statements.
1.

True

2.

False


The primary objective of financial accounting is to provide
general purpose financial statements to help external
users analyze and interpret an organization's activities.
1.

True

2.

False

Bookkeeping is the same as accounting.
1.

True

2.

False

Accounting is one way important information about businesses
is reported to decision makers.
1.

True

2.

False

The Financial Accounting Board is the group that establishes
reporting requirements for companies that issue stock to
the public.
1.

True

2.

False

Public accounting provides the majority of the career
opportunities.
1.

True

2.

False

Accounting is an information and measurement system that
identifies, records, and communicates financial
information to users.
1.

True

2.

False

Generally accepted accounting principles were established to
improve conformity in financial reporting by making
information relevant, reliable and comparable.
1.

True


2.

False

Generally accepted accounting principles are the basic

assumptions, concepts, and guidelines for preparing
financial statements.
1.

True

2.

False

Separate legal status means that a corporation can conduct
business with the rights, duties and responsibilities as a
person.
1.

True

2.

False

The majority of accounting career opportunities are in the
private sector.
1.

True

2.

False

The Sarbanes-Oxley Act requires issuers of securities to
disclose the adoption of an ethics code.
1.

True

2.

False

Internal auditors assess an employer's procedures and controls
over recordkeeping activities and physical control of a
firm's assets.
1.

True

2.

False

Internal controls are procedures designed to protect company
property, ensure reliable reports, promote efficiency and
ensure employees follow company policies.
1.

True

2.

False


Ethics are not important to decision making in accounting.
1.

True

2.

False

US accounting practices are viewed as rule-based as financial
statements are prepared using technical, specific and
detailed rules.
1.

True

2.

False

Separate legal status means that owners, called shareholders
are not personally liable for corporate acts and debts.
1.

True

2.

False

Accounting software packages reduce the time, effort and cost
of recordkeeping.
1.

True

2.

False

Managerial accounting is an area of accounting that provides
internal reports to assist in the decision-making needs of
internal users.
1.

True

2.

False

The Securities and Exchange Commission (SEC) is an arm of
the federal government that establishes reporting
requirements for companies that issue stock to the
public.
1.

True

2.

False


Guidelines for ethical decision making requires recognition of
an ethical concern and consideration of good and bad
consequences.
1.

True

2.

False

External users include lenders, shareholders, customers, and
regulators.
1.

True

2.

False

Opportunities in accounting include auditing, management

consulting,and tax planning.
1.

True

2.

False

Bookkeeping is the recording of transactions and events and is
only part of accounting.
1.

True

2.

False

Good ethics are good business.
1.

True

2.

False

Internal users include lenders, shareholders, brokers and
managers.

1.

True

2.

False

Internal reports are subject to the same rules as external
reports as consistency is important and makes
information more useful to the user.
1.

True

2.

False


External auditors examine financial statements to determine if
they are prepared according to generally accepted
accounting principles.
1.

True

2.

False

State ethics codes require CPAs who audit financial statements
to disclose areas where those statements fail to comply
with GAAP.
1.

True

2.

False

Three forms of business include service providers, wholesalers
and retailers.
1.

True

2.

False

A limited liability company is treated like a corporation for
liability and tax purposes.
1.

True

2.

False

Identifying the proper ethical path is easy.
1.

True

2.

False

Text Questions
Explain the flow of accounting in a business's activities.
Answer Given

Accounting is a process that identifies business related transaction and events to
record, measure and classify. This information must then be communicated out in the
form of financial statements.


_____________________ is the federal agency that sets
reporting rules for organizations that sell ownership
shares to the public.
Answer Given

SEC (Securities and Exchange Commission)

Identify the users and uses of accounting information.
Answer Given

There are two general types of users of accounting information. (1) Internal users are
managers and officers of businesses. They require information about business
activities in order to make decisions about planning, monitoring, and control. (2)
External users rely on financial statements to make business decisions. These users
include lenders, and shareholders. Lenders need information for measuring the risk
and return of loans. Shareholders need information for assessing the risk and return in
owning shares.

Accounting is an ______________________ that identifies,
records and communicates relevant, reliable and
comparable information about an organization's
economic activities.
Answer Given

information and measurement system (or information system)

__________________________ is the recording of transactions
or events, and is just one part of accounting.
Answer Given

Recordkeeping (or bookkeeping)

______________________ is the recording of financial
transactions and events, either manually or electronically.
Answer Given

Recordkeeping or bookkeeping

____________________ is the independent group of full-time
members responsible for setting the rules of accounting.

Answer Given


FASB (Financial Accounting Standards Board)

How do the information needs of external users such as lenders
differ from an external auditor?
Answer Given

Lenders use a company's accounting information to establish credit-worthiness and
assess risk involved in loaning money. Whereas, an external auditors may look at the
same accounting information to determine compliance with standards and practices
(GAAP).

_______________ are those that use accounting information for
the purpose of managing the organization.
Answer Given

Internal Users

Identify the two main groups involved in establishing generally
accepted accounting principles.
Answer Given

The FASB is the private group that establishes GAAP. The SEC establishes reporting
requirements for companies that issue stock to the public.

Managerial Accounting is the area of accounting mainly aimed
at serving the decision making needs of the
_______________.

Answer Given

internal users

Explain the role of accounting in the information age.
Answer Given

Accounting is an information and measurement system. It identifies, records, and
communicates relevant, reliable and comparable information about business activities.
Accounting also includes the crucial process of analysis and interpretation.

Explain why accounting is referred to as "the language of
business".
Answer Given


Because all types and functions of organizations must use this "language" to
communicate necessary decision-making information.

______________________ are procedures set up to protect
company property and equipment, ensure reliable
accounting reports, promote efficiency, and encourage
adherence to company policies.
Answer Given

Internal controls

What are two questions that an owner might be able to answer
by looking at accounting information?
Answer Given

Some possible questions are: 1) How, what, when and how much must be purchased?
2) What are the projected sales and costs? 3) What are the costs and benefits of
particular products and service? 4) What were the payroll costs last month? 5) What is
the projected number of employees needed in the next month? Many other questions
are possible.

What aspects of business involve accounting?
Answer Given

All aspects of business involve accounting from buying and selling goods and services
to credit approval, checking accounts and payroll. All business functions perform
recordkeeping.

What is social responsibility?
Answer Given

A company's involvement in and concern for society's well being. Being socially
responsible might include acts of charity, measures to increase product safety, or
support of public systems such as education.

______________ is the area of accounting aimed at serving
external users.
Answer Given

Financial accounting


International Accounting Standards Board is the group that
works to identify ______________ and encourages global

acceptance.
Answer Given

preferred accounting practices

What are some examples of how an organization can act
socially responsible?
Answer Given

Organizations can make donations to other organizations that focus on social well
being, such as hospitals, schools and community programs. They can also become
involved in social programs including product and worker safety campaigns.

What is the purpose of the internal controls in a company?
Answer Given

Internal controls are necessary to monitor and control a company's activities. Internal
control procedures protect, promote reliability, efficiency and adherence to company
policies.

What role does technology play in the accounting function?
Answer Given

In today's information age, technology plays a major role in improving efficiency of
performing record keeping, as well as reducing frequency of errors.

_________ are beliefs that separate right from wrong.
Answer Given

Ethics

Explain why ethics are an integral part of accounting.
Answer Given

The purpose of accounting is to provide useful information for decision makers. For
information to be useful, it must be trusted. This requires ethical behavior by
accountants and managers in all phases of gathering, analyzing and reporting financial
information so that good decisions are made.


Identify several opportunities in accounting and its related
fields.
Answer Given

The traditional areas of accounting include financial accounting, managerial
accounting, and tax accounting. Work in related fields includes lending, underwriting,
market research, and business valuation.

What are the author's recommended three steps for making a
good ethical decision?
Answer Given

1) Use your personal beliefs about right and wrong to identify any ethical concerns. 2)
Look beyond your belief system to consider other influences and all possible
consequences. 3) Make a decision that considers all choices and consequences.

Shareholders are owners of a corporation and typically elect
______________________ to oversee their interests in the
corporation.
Answer Given

a board of directors

____________________ is the information and measurement
system that identifies, records, and communicates
relevant information about a company's business
activities.
Answer Given

Accounting

A primary purpose of ________________ is to make information
in financial statements relevant, reliable and comparable.
Answer Given

GAAP

______________ users of accounting information are not
directly involved in running the organization.
Answer Given

External