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1 | |
The primary purpose of accounting is to determine whether the business entity is profitable or unprofitable in its operations. |
| | A) | True |
| | B) | False |
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2 | |
Costs, prices, sales volume, profits, and return on investment are all accounting measurements. |
| | A) | True |
| | B) | False |
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3 | |
The types of accounting information are limited. |
| | A) | True |
| | B) | False |
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4 | |
Accountants use the term financial position to describe an entity's activities during the year. |
| | A) | True |
| | B) | False |
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5 | |
Financial accounting information is designed primarily to assist investors and creditors in deciding where to place their scarce investment resources. |
| | A) | True |
| | B) | False |
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6 | |
Management accounting involves the development and interpretation of accounting information intended specifically to aid management in acquiring investment resources. |
| | A) | True |
| | B) | False |
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7 | |
The most challenging aspect of tax accounting is in the preparation of the many forms required for an entity's tax return. |
| | A) | True |
| | B) | False |
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8 | |
An accounting system consists of personnel, procedures, devices, and records used by an organization to develop accounting information and to communicate this information to decision makers. |
| | A) | True |
| | B) | False |
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9 | |
The cost of producing the types of accounting reports required by law is always cost-effective. |
| | A) | True |
| | B) | False |
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10 | |
External users of financial accounting information are the same users of management accounting information. |
| | A) | True |
| | B) | False |
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11 | |
Return of investment and return on investment refer to the same thing--the amount returned at the end of the investment period. |
| | A) | True |
| | B) | False |
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12 | |
If you invest $50,000 and receive $52,500 at the end of the investment period, the return on your investment is 5 percent. |
| | A) | True |
| | B) | False |
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13 | |
The primary financial statements are an income statement and a balance sheet. |
| | A) | True |
| | B) | False |
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14 | |
One financial statement that covers a specific period of time is the balance sheet. |
| | A) | True |
| | B) | False |
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15 | |
Externally reported financial information and financial statements are primarily historical in nature. |
| | A) | True |
| | B) | False |
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16 | |
Management accounting is the preparation and use of accounting information systems to achieve the organization's objectives by supporting decision makers outside the enterprise. |
| | A) | True |
| | B) | False |
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17 | |
Plant managers are internal users of accounting information systems. |
| | A) | True |
| | B) | False |
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18 | |
The management accounting information created and used primarily by internal users is intended above all for planning and control decisions. |
| | A) | True |
| | B) | False |
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19 | |
One of the specific purposes of management accounting system is to provide information useful to help the enterprise achieve its goals, objectives, and mission. |
| | A) | True |
| | B) | False |
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20 | |
Standards adopted and used as a guide in measuring, recording, and reporting the financial affairs and activities of a business are known as accounting concepts. |
| | A) | True |
| | B) | False |
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21 | |
Today, the most authoritative source of generally accepted accounting principles is the Financial Accounting Standards Board (FASB). |
| | A) | True |
| | B) | False |
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22 | |
The primary purpose of the conceptual framework for financial reporting is to provide guidance to the FASB in developing new accounting standards. |
| | A) | True |
| | B) | False |
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23 | |
The Securities and Exchange Commission is a governmental agency with the legal power to establish accounting principles and financial reporting requirements for publicly owned corporations. |
| | A) | True |
| | B) | False |
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24 | |
The main purpose of the internal control structure is to detect fraud. |
| | A) | True |
| | B) | False |
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25 | |
Uncovering fraud is the primary purpose of an audit. |
| | A) | True |
| | B) | False |
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26 | |
The major purpose of an audit is to uncover theft and fraud so that the users of the financial statements can have a high level of assurance that all money is accounted for properly. |
| | A) | True |
| | B) | False |
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27 | |
The American Institute of Certified Public Accountants licenses certified public accountants. |
| | A) | True |
| | B) | False |
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28 | |
Whichever career in accounting you choose, public, management, financial forecasting, cost accounting, internal auditing, government accounting, or accounting education, it is your obligation as a professional to serve the public's best interest, even at the sacrifice of personal advantage. |
| | A) | True |
| | B) | False |
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29 | |
The American Institute of Certified Public Accountants issues the Certificate of Management Accounting (CMA). |
| | A) | True |
| | B) | False |
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30 | |
The code of ethics of the Institute of Management Accountants (IMA) includes the requirements of competency, confidentiality, integrity, and subjectivity. |
| | A) | True |
| | B) | False |
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31 | |
Which of the following provides information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
| | E) | Bookkeeping |
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32 | |
Which of the following provides information that is intended primarily for use by internal management in decision making required to run the business? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
| | E) | Bookkeeping |
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33 | |
Which of the following involves the preparation of income tax returns and anticipating the tax effects of business transactions and structuring them in such a way as to minimize the income tax burden? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
| | E) | Bookkeeping |
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34 | |
Which of the following involves determining the cost of certain business activities and interpreting cost information? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
| | E) | Bookkeeping |
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35 | |
Which of the following refers to recording the routine transactions and day-to-day record keeping of an enterprise? |
| | A) | Financial accounting |
| | B) | Management accounting |
| | C) | Tax accounting |
| | D) | Cost accounting |
| | E) | Bookkeeping |
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36 | |
An accounting system is cost-effective when it does which of the following? |
| | A) | Produces useful information |
| | B) | Produces reports required by law |
| | C) | Uses computers to replace manual activities |
| | D) | All of the above |
| | E) | None of the above |
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37 | |
The basic functions of an accounting system include which of the following? |
| | A) | Interpreting and recording the effects of business transactions |
| | B) | Classifying the effects of similar transactions |
| | C) | Summarizing and communicating the information contained in the system |
| | D) | Only A and B |
| | E) | A, B, and C |
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38 | |
Which of the following financial statements is also known as a statement of financial position? |
| | A) | Balance sheet |
| | B) | Income statement |
| | C) | Statement of cash flows |
| | D) | Bank statement |
| | E) | None of the above |
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39 | |
The personnel, procedures, devices, and records used by an organization to develop accounting information and communicate that information to decision makers are called which of the following? |
| | A) | Audits |
| | B) | Accounting systems |
| | C) | Personnel systems |
| | D) | Internal control structures |
| | E) | None of the above |
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40 | |
The two things that make up cash flow prospects are which of the following? |
| | A) | Return of investment and return on investment |
| | B) | Return on investment and timing of investment |
| | C) | Return of investment and timing of investment |
| | D) | Periodic interest and dividends |
| | E) | None of the above |
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41 | |
Which of the following shows details and results of the company's profit-related activities for a period of time? |
| | A) | Balance sheet |
| | B) | Income statement |
| | C) | Statement of cash flows |
| | D) | Statement of financial position |
| | E) | None of the above |
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42 | |
Which of the following shows the details of the company's activities involving cash during a period of time? |
| | A) | Income statement |
| | B) | Statement of financial position |
| | C) | Balance sheet |
| | D) | Revenue - Costs = Profits |
| | E) | None of the above |
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43 | |
Which of the following would be considered an external user? |
| | A) | Owner |
| | B) | Store manager |
| | C) | Plant manager |
| | D) | Board of directors |
| | E) | All of the above |
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44 | |
You made a $10,000 loan to your cousin's company. At the end of one year, the company returned to you $10,850. The $850 is called which one of the following? |
| | A) | Return of investment |
| | B) | Return on investment |
| | C) | An 8.5% return on investment |
| | D) | B and C |
| | E) | A and C |
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45 | |
A characteristic of externally reported information is that it is which of the following? |
| | A) | Largely historical in nature |
| | B) | May be inexact and contain approximations |
| | C) | Is general-purpose in nature |
| | D) | Its usefulness is enhanced by explanation |
| | E) | All of the above |
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46 | |
Which of the following would be considered an internal user? |
| | A) | Owner |
| | B) | Creditor |
| | C) | Chief financial officer |
| | D) | Labor union |
| | E) | None of the above |
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47 | |
Which of the following is not a characteristic of management accounting information? |
| | A) | Timeliness is of importance |
| | B) | Decision-making authority is identified |
| | C) | Historically oriented |
| | D) | Measures efficiency and effectiveness |
| | E) | A means to an end, not an end in and of itself |
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48 | |
Which of the following provides the framework for determining what information is to be included in financial statements and how that information is to be presented? |
| | A) | Generally accepted auditing standards |
| | B) | Generally accepted amortization standards |
| | C) | Accounting standards and practices |
| | D) | Securities and Exchange Commission |
| | E) | Generally accepted accounting principles |
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49 | |
Measures used by an organization to guard against errors, waste, and fraud; to assure the reliability of accounting information; to promote compliance with management policies; and to evaluate the level of performance of all divisions of the company, are called which of the following? |
| | A) | Audits |
| | B) | Internal control structure |
| | C) | Internal auditing |
| | D) | Integrity |
| | E) | None of the above |
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50 | |
Which of the following enhances the integrity of accounting information? |
| | A) | Institutional features can add significantly to the integrity |
| | B) | Professional accounting organizations play a significant role |
| | C) | Personal competence, judgment, and ethical behavior play a role |
| | D) | All of the above |
| | E) | Only A and C |
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51 | |
Which of the following is a professional accounting organization that is dedicated to the promotion and development of the practice of internal auditing? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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52 | |
Which of the following is a professional accounting organization that intends to influence the concepts and ethical practice of management accounting and financial management? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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53 | |
Which of the following is a professional accounting organization of certified public accountants that engages in a variety of professional activities, including establishing auditing standards, conducting research, and working closely with the FASB in establishing financial reporting standards? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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54 | |
The membership of which of the following consists primarily of accounting educators? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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55 | |
An investigation of financial statements designed to determine their fairness in relation to generally accepted accounting principles is called which of the following? |
| | A) | Internal control structure |
| | B) | External control structure |
| | C) | Audit |
| | D) | Bookkeeping |
| | E) | Management accounting |
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56 | |
Which of the following issues a Certificate in Internal Auditing? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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57 | |
Which of the following issues a Certificate in Management Accounting? |
| | A) | Institute of Internal Auditors |
| | B) | Institute of Management Accountants |
| | C) | American Institute of CPAs |
| | D) | Financial Accounting Standards Board (FASB) |
| | E) | American Accounting Association |
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58 | |
Which of the following issues licenses to practice as a Certified Public Accountant? |
| | A) | Institute of Management Accountants |
| | B) | American Institute of CPAs |
| | C) | Financial Accounting Standards Board (FASB) |
| | D) | American Accounting Association |
| | E) | None of the above |
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59 | |
Expectations of ethical conduct are important for accountants. For management accountants, the code of ethics includes which of the following requirements? |
| | A) | Competence |
| | B) | Confidentiality |
| | C) | Integrity |
| | D) | Objectivity |
| | E) | All of the above |
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60 | |
Which of the following is not a government agency? |
| | A) | Internal Revenue Service (IRS) |
| | B) | Security and Exchange Commission (SEC) |
| | C) | General Accounting Office (GAO) |
| | D) | American Accounting Association (AAA) |
| | E) | Federal Deposit Insurance Corporation# |
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2002 McGraw-Hill Higher Education