Unit 2-D196 Final Exam Questions and
All Correct Answers 2025-2026
Updated.
What is the definition of vertical analysis of financial statements?
Restricting attention to companies only in certain strategic industries
Displaying each line item as a percentage of another for comparison to other companies in the
industry
Looking across time at a common-size financial statement and noting how relationships are
changing
Expressing each amount as a percentage of net income for the year - Answer Displaying each
line item as a percentage of another for comparison to other companies in the industry
Accounting plays a vital role in the decision-making process. Which action is the first step in the
decision-making process?
Identify the issue.
Identify the alternatives.
Gather information.
Guarantee a good outcome. - Answer Identify the issue.
The money that a company needs to buy its land, pay its employees, and buy its supplies is
called capital. What are the potential sources of capital for a business?
Gross business earnings, employees, and taxes
Investors, creditors, and retained business earnings
Employees, investors, and retained business earnings
Taxes, investors, and retained business earnings - Answer Investors, creditors, and retained
business earnings
True or False: Accountants measure and communicate the results of business activities. -
Answer True
Three basic functions of an accounting system? - Answer 1. Analysis - looking at business
events to determine if information should be captured by the accounting system = analyze
transactions
2. Bookkeeping - day-to-day keeping track of transactions = handle routine bookkeeping tasks
,3. Evaluation - obtaining and using financial information to determine the health and
performance of a business = structure information so it can be used to evaluate the
performance and health of the business
The Decision-Making Process - Answer Step 1 - Identify the issue
Step 2 - Gather information
Step 3 - Identify alternatives
Step 4 - Select the option that will most likely result in the desired objective = Select best option
Managerial Accounting (Internal) - Answer Product Costs
Breakeven analysis
budgeting
performance evaluation
outsource production
Financial Accounting (External) - Answer Credit analysis
regulatory uses
Which primary area of accounting generates reports for internal users?
General-purpose accounting
Financial accounting
Management accounting
Governmental accounting - Answer Management accounting
Which group uses financial information to evaluate whether a company will be able to repay a
loan?
Lenders
Employees
Management
Investors - Answer Lenders
Which of the primary financial statements reports the resources, obligations, and owner's
equity of a company?
Statement of cash flows
Income statement
Master budget
, Balance sheet - Answer Balance sheet
What is the role of the IASB in regulating accounting standards?
Work under the direction of the SEC to establish financial accounting standards
Use legal authority to establish financial accounting standards for U.S. companies
Establish international accounting standards
Work as a subcommittee of the American Institute of Certified Public Accountants (AICPA) to
regulate accounting instruction - Answer Establish international accounting standards
1/1
What group of people make up the FASB?
Senior IRS staff members
Senior SEC staff members
Financial accounting specialists appointed by the U.S. Congress
People from a variety of business-related backgrounds - Answer People from a variety of
business-related backgrounds
What is the role of the GASB in setting accounting standards?
The GASB establishes accounting and financial reporting standards together with the IASB.
The GASB establishes accounting and reporting standards together with the IRS.
The GASB establishes accounting and reporting standards together with the SEC.
The GASB is a private-sector organization that establishes accounting and financial reporting
standards for U.S. state and local governments. - Answer The GASB is a private-sector
organization that establishes accounting and financial reporting standards for U.S. state and
local governments.
In what way do accountants have an economic incentive to conduct themselves ethically?
*The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
*Most computerized accounting systems recognize unethical accounting procedures.
*It is not possible for an unethical accountant to rise to a top management position in a
company.
*It is not possible for an unethical accountant to become a certified public accountant. - Answer
The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
How is it possible for an accountant to intentionally deceive financial statement users and yet
still technically be in compliance with generally accepted accounting principles (GAAP)?
All Correct Answers 2025-2026
Updated.
What is the definition of vertical analysis of financial statements?
Restricting attention to companies only in certain strategic industries
Displaying each line item as a percentage of another for comparison to other companies in the
industry
Looking across time at a common-size financial statement and noting how relationships are
changing
Expressing each amount as a percentage of net income for the year - Answer Displaying each
line item as a percentage of another for comparison to other companies in the industry
Accounting plays a vital role in the decision-making process. Which action is the first step in the
decision-making process?
Identify the issue.
Identify the alternatives.
Gather information.
Guarantee a good outcome. - Answer Identify the issue.
The money that a company needs to buy its land, pay its employees, and buy its supplies is
called capital. What are the potential sources of capital for a business?
Gross business earnings, employees, and taxes
Investors, creditors, and retained business earnings
Employees, investors, and retained business earnings
Taxes, investors, and retained business earnings - Answer Investors, creditors, and retained
business earnings
True or False: Accountants measure and communicate the results of business activities. -
Answer True
Three basic functions of an accounting system? - Answer 1. Analysis - looking at business
events to determine if information should be captured by the accounting system = analyze
transactions
2. Bookkeeping - day-to-day keeping track of transactions = handle routine bookkeeping tasks
,3. Evaluation - obtaining and using financial information to determine the health and
performance of a business = structure information so it can be used to evaluate the
performance and health of the business
The Decision-Making Process - Answer Step 1 - Identify the issue
Step 2 - Gather information
Step 3 - Identify alternatives
Step 4 - Select the option that will most likely result in the desired objective = Select best option
Managerial Accounting (Internal) - Answer Product Costs
Breakeven analysis
budgeting
performance evaluation
outsource production
Financial Accounting (External) - Answer Credit analysis
regulatory uses
Which primary area of accounting generates reports for internal users?
General-purpose accounting
Financial accounting
Management accounting
Governmental accounting - Answer Management accounting
Which group uses financial information to evaluate whether a company will be able to repay a
loan?
Lenders
Employees
Management
Investors - Answer Lenders
Which of the primary financial statements reports the resources, obligations, and owner's
equity of a company?
Statement of cash flows
Income statement
Master budget
, Balance sheet - Answer Balance sheet
What is the role of the IASB in regulating accounting standards?
Work under the direction of the SEC to establish financial accounting standards
Use legal authority to establish financial accounting standards for U.S. companies
Establish international accounting standards
Work as a subcommittee of the American Institute of Certified Public Accountants (AICPA) to
regulate accounting instruction - Answer Establish international accounting standards
1/1
What group of people make up the FASB?
Senior IRS staff members
Senior SEC staff members
Financial accounting specialists appointed by the U.S. Congress
People from a variety of business-related backgrounds - Answer People from a variety of
business-related backgrounds
What is the role of the GASB in setting accounting standards?
The GASB establishes accounting and financial reporting standards together with the IASB.
The GASB establishes accounting and reporting standards together with the IRS.
The GASB establishes accounting and reporting standards together with the SEC.
The GASB is a private-sector organization that establishes accounting and financial reporting
standards for U.S. state and local governments. - Answer The GASB is a private-sector
organization that establishes accounting and financial reporting standards for U.S. state and
local governments.
In what way do accountants have an economic incentive to conduct themselves ethically?
*The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
*Most computerized accounting systems recognize unethical accounting procedures.
*It is not possible for an unethical accountant to rise to a top management position in a
company.
*It is not possible for an unethical accountant to become a certified public accountant. - Answer
The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
How is it possible for an accountant to intentionally deceive financial statement users and yet
still technically be in compliance with generally accepted accounting principles (GAAP)?
