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Chapter Quiz
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The reports and financial statements prepared by accountants:
A)are much more useful for profit-seeking businesses than they are for not-for-profit organizations.
B)are mainly used to help the firm complete its tax forms.
C)provide information that can be used by decision-makers both inside and outside the organization.
D)have lost much of their relevance as firms have moved into a more global environment.
The preparation of financial statements for people outside the firm (creditors, unions, suppliers, and others) is the goal of:
B)financial accounting.
C)managerial accounting.
D)cost accounting.
Taylor Casual, a chain of retail clothing stores, wants to assure investors and other outsiders that its financial statements are accurate. One way to do so would be to hire a public accounting firm to:
A)produce an internal audit.
B)take over all of its accounting functions.
C)provide a "generally accepted practices" endorsement.
D)perform an independent audit.
One of the major financial statements prepared in the fifth step of the accounting cycle is the:
A)general journal.
B)statement of cash flows.
C)asset summary.
D)social audit.
April works in the accounting department at Henson's Tire & Auto. She is concerned that the company has been placing too many orders for office supplies and wants to look at all of the transactions involving the purchase of office supplies for the past several months. April could find such information by looking at the supplies account in the:
B)cash flow statement.
D)account debit book.
Horst works as an accountant for a mid-sized retail store. He has just completed a trial balance that turned up no unexpected problems. Horst's next major task is likely to be:
A)conducting the full audit.
B)preparing a tax return for the company.
C)preparing the store's balance sheet and other major financial statements.
D)taking a well deserved vacation, since he has just finished the last step in the accounting cycle for the current period.
Which financial statement represents what the company owns and owes as of a specific date?
A)income statement
B)balance sheet
C)statement of cash flows
D)trial balance
The fundamental accounting equation states that assets equal __________.
A)liabilities minus owners' equity
B)liabilities plus receivables
C)payables plus cash equivalents
D)liabilities plus owners' equity
During a period of rising prices, FIFO (first in, first out) inventory valuation method will result in ________ net income figures than would LIFO (last in, first out).
C)the same
D)less accurate
You are the loan officer of the ABC Bank. A local firm has approached you requesting a sizable loan. What group of financial ratios would indicate the degree to which this company already is financed by borrowed funds?
A)liquidity ratios
B)leverage ratios
C)activity ratios
D)profitability ratios

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