Accounting - (correct answer) A system of providing "quantitative information,
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions."
Balance Sheet - (correct answer) Document which reports the resources of a
company (the assets), the company's obligations (the liabilities), and the owners' equity,
which represents how much money has been invested in the company by its owners.
American Institute of Certified Public Accountants (AICPA) - (correct answer) The
professional organization of certified public accountants in the United States.
Bookkeeping - (correct answer) The preservation of a systematic, quantitative
record of an activity.
Certified Public Accountant - (correct answer) A person who has taken a minimum
number of college-level accounting classes, has passed the dreaded CPA exam, and
has met other requirements set by his or her state.
Financial Accounting - (correct answer) The name given to accounting information
provided for and used by external users.
Financial Accounting Standards Board (FASB) - (correct answer) Private, non-profit
body that sets accounting standards in the United States.
Financial Statements - (correct answer) The three primary financial information
documents: the balance sheet, income statement, and statement of cash flows.
Income Statement - (correct answer) This document reports the amount of net
income earned by a company during a period, with annual and quarterly income
statements being the most common.
Internal Revenue Service (IRS) - (correct answer) The government agency
responsible for tax collection and tax law enforcement.
International Accounting Standards Board (IASB) - (correct answer) An
independent, international body formed to develop worldwide accounting standards.
International Financial Reporting Standards (IFRS) - (correct answer) The
accounting standards produced by the IASB.
Managerial Accounting - (correct answer) The name given to accounting systems
designed for internal users.
,Public Company Accounting Oversight Board (PCAOB) - (correct answer) A private,
non-profit organization that effectively serves as an arm of the SEC in registering,
inspecting, and disciplining the auditors of all publicly traded companies.
Statement of Cash Flows - (correct answer) This document reports the amount of
cash collected and paid out by a company in the following three types of activities:
operating, investing, and financing.
Accounting Equation - (correct answer) Assets = Liabilities + Owners' Equity
Accumulated Other Comprehensive Income - (correct answer) The source of these
increased assets
Assets - (correct answer) Assets are the firm's economic resources, formally defined
as "probable future economic benefits obtained or controlled by a particular entity as a
result of past transactions or events
What does accounting focus on? - (correct answer) The impact a business's
activities have on its overall financial performance
Which report summarizes cash collections and cash expenditures from operating,
investing, and financing activities over a period of time? - (correct answer)
Statement of cash flows
Which users would have a primary concern with an organization's ability to provide
healthcare benefits? - (correct answer) Employees
Which benefit does a corporation gain by following Generally Accepted Accounting
Principles (GAAP)? - (correct answer) An increase in its comparability to other
companies
Which body regulates a certified public accounting firm's audit practices when the firm is
auditing a large publicly traded company? - (correct answer) The Public Company
Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices? - (correct answer)
Information technology
What two items of information are revealed on the balance sheet? - (correct answer)
Ownership, Debt
Which term is defined as the residual interest in the net assets of a company? -
(correct answer) Owners' equity
,A corporation has total liabilities of $300 million, total owners' equity of $100 million, and
current assets of $50 million.
What is the value of the firm's long-term assets? - (correct answer) $350 million
Which situation should result in revenue recognition on the income statement for the
year ending 12/31/14 if the firm is using accrual-basis accounting? - (correct answer)
In 2014, a company provides services to a customer for which cash will be collected the
next year (2015).
Which category on the statement of cash flows summarizes cash receipts and
payments to owners and creditors of the company? - (correct answer) Cash flows
from financing activities
Where would an investor find a summary of a company's significant accounting
policies? - (correct answer) In the notes to financial statements
Which assurance does an external audit report provide for its readers? - (correct
answer) The company's financial statements fairly reflect its financial position
Match each accounting term with its definition. - (correct answer) Reliable =
Information that can be verified
Relevant = Information having to do with the matter at hand
Material = Information that is important enough to make a difference
Conservatism = Information related to recognizing losses as they occur
Order the steps in the decision cycle from first (1) to last (5). - (correct answer) 1.
Prepare financial statements
2.Analyze financial statements
3.Gather information
4. Make decision
5. Implement decision
Partial financial information for a company is as follows: Current assets $36,543 Total
assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity
$10,158 Sales $46,997 Net Income $ 3,761 Market value of shares$41,316
What is the price-earnings (PE) ratio for this company? - (correct answer) 11.0
What does it mean if a company has a debt ratio of 101.5%? - (correct answer) The
company has 1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold
remains the same? - (correct answer) Continual decrease in sales
, Which two cash flow adequacy ratios represent a cash cow? - (correct answer)
$6,991/$5,486
$5,220/$1,875
Which formula yields a cash times interest earned ratio of 11? - (correct answer)
Cash before interest and taxes of $11,000 / cash paid for interest of $1,000
Which form of debt should be reported in the long-term liability category? - (correct
answer) Notes payable expected to be paid in 18 months
Which two values affect the measurement of net income? - (correct answer)
Ordinary gains and losses
Operating expenses
Which two items' subtotals are included in a multi-step income statement? - (correct
answer) Gross profit
Income from operations
What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was
based on a 22% increase? - (correct answer) $153,279
What is a common category in a statement of cash flows? - (correct answer) Cash
from investing activities
Which cash flow category would include "cash received from investors"? - (correct
answer) Cash from financing activities
Which item is an investing activity? - (correct answer) Cash payments for purchase
of plant assets
What impact does the sale of equipment have on the statement of cash flows? -
(correct answer) Increase in cash from investing activities
What is known about the direct and indirect methods of preparing statements of cash
flow? - (correct answer) The indirect method is more popular among large U.S.
companies
Which two examples represent financial statement errors? - (correct answer) The
accounting department miscalculates the payroll tax due at year-end, resulting in an
inaccurate liability
The accountant unintentionally records amounts as revenue that were prepaid by
customers but not yet earned
Which internal control is intended to ensure that a company does not mistakenly pay a
supplier for an invoice that includes more items than were actually received? - (correct
primarily financial in nature, about economic entities that is intended to be useful in
making economic decisions."
Balance Sheet - (correct answer) Document which reports the resources of a
company (the assets), the company's obligations (the liabilities), and the owners' equity,
which represents how much money has been invested in the company by its owners.
American Institute of Certified Public Accountants (AICPA) - (correct answer) The
professional organization of certified public accountants in the United States.
Bookkeeping - (correct answer) The preservation of a systematic, quantitative
record of an activity.
Certified Public Accountant - (correct answer) A person who has taken a minimum
number of college-level accounting classes, has passed the dreaded CPA exam, and
has met other requirements set by his or her state.
Financial Accounting - (correct answer) The name given to accounting information
provided for and used by external users.
Financial Accounting Standards Board (FASB) - (correct answer) Private, non-profit
body that sets accounting standards in the United States.
Financial Statements - (correct answer) The three primary financial information
documents: the balance sheet, income statement, and statement of cash flows.
Income Statement - (correct answer) This document reports the amount of net
income earned by a company during a period, with annual and quarterly income
statements being the most common.
Internal Revenue Service (IRS) - (correct answer) The government agency
responsible for tax collection and tax law enforcement.
International Accounting Standards Board (IASB) - (correct answer) An
independent, international body formed to develop worldwide accounting standards.
International Financial Reporting Standards (IFRS) - (correct answer) The
accounting standards produced by the IASB.
Managerial Accounting - (correct answer) The name given to accounting systems
designed for internal users.
,Public Company Accounting Oversight Board (PCAOB) - (correct answer) A private,
non-profit organization that effectively serves as an arm of the SEC in registering,
inspecting, and disciplining the auditors of all publicly traded companies.
Statement of Cash Flows - (correct answer) This document reports the amount of
cash collected and paid out by a company in the following three types of activities:
operating, investing, and financing.
Accounting Equation - (correct answer) Assets = Liabilities + Owners' Equity
Accumulated Other Comprehensive Income - (correct answer) The source of these
increased assets
Assets - (correct answer) Assets are the firm's economic resources, formally defined
as "probable future economic benefits obtained or controlled by a particular entity as a
result of past transactions or events
What does accounting focus on? - (correct answer) The impact a business's
activities have on its overall financial performance
Which report summarizes cash collections and cash expenditures from operating,
investing, and financing activities over a period of time? - (correct answer)
Statement of cash flows
Which users would have a primary concern with an organization's ability to provide
healthcare benefits? - (correct answer) Employees
Which benefit does a corporation gain by following Generally Accepted Accounting
Principles (GAAP)? - (correct answer) An increase in its comparability to other
companies
Which body regulates a certified public accounting firm's audit practices when the firm is
auditing a large publicly traded company? - (correct answer) The Public Company
Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices? - (correct answer)
Information technology
What two items of information are revealed on the balance sheet? - (correct answer)
Ownership, Debt
Which term is defined as the residual interest in the net assets of a company? -
(correct answer) Owners' equity
,A corporation has total liabilities of $300 million, total owners' equity of $100 million, and
current assets of $50 million.
What is the value of the firm's long-term assets? - (correct answer) $350 million
Which situation should result in revenue recognition on the income statement for the
year ending 12/31/14 if the firm is using accrual-basis accounting? - (correct answer)
In 2014, a company provides services to a customer for which cash will be collected the
next year (2015).
Which category on the statement of cash flows summarizes cash receipts and
payments to owners and creditors of the company? - (correct answer) Cash flows
from financing activities
Where would an investor find a summary of a company's significant accounting
policies? - (correct answer) In the notes to financial statements
Which assurance does an external audit report provide for its readers? - (correct
answer) The company's financial statements fairly reflect its financial position
Match each accounting term with its definition. - (correct answer) Reliable =
Information that can be verified
Relevant = Information having to do with the matter at hand
Material = Information that is important enough to make a difference
Conservatism = Information related to recognizing losses as they occur
Order the steps in the decision cycle from first (1) to last (5). - (correct answer) 1.
Prepare financial statements
2.Analyze financial statements
3.Gather information
4. Make decision
5. Implement decision
Partial financial information for a company is as follows: Current assets $36,543 Total
assets $58,719 Current liabilities $24,824 Total liabilities $48,561 Stockholders' equity
$10,158 Sales $46,997 Net Income $ 3,761 Market value of shares$41,316
What is the price-earnings (PE) ratio for this company? - (correct answer) 11.0
What does it mean if a company has a debt ratio of 101.5%? - (correct answer) The
company has 1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold
remains the same? - (correct answer) Continual decrease in sales
, Which two cash flow adequacy ratios represent a cash cow? - (correct answer)
$6,991/$5,486
$5,220/$1,875
Which formula yields a cash times interest earned ratio of 11? - (correct answer)
Cash before interest and taxes of $11,000 / cash paid for interest of $1,000
Which form of debt should be reported in the long-term liability category? - (correct
answer) Notes payable expected to be paid in 18 months
Which two values affect the measurement of net income? - (correct answer)
Ordinary gains and losses
Operating expenses
Which two items' subtotals are included in a multi-step income statement? - (correct
answer) Gross profit
Income from operations
What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was
based on a 22% increase? - (correct answer) $153,279
What is a common category in a statement of cash flows? - (correct answer) Cash
from investing activities
Which cash flow category would include "cash received from investors"? - (correct
answer) Cash from financing activities
Which item is an investing activity? - (correct answer) Cash payments for purchase
of plant assets
What impact does the sale of equipment have on the statement of cash flows? -
(correct answer) Increase in cash from investing activities
What is known about the direct and indirect methods of preparing statements of cash
flow? - (correct answer) The indirect method is more popular among large U.S.
companies
Which two examples represent financial statement errors? - (correct answer) The
accounting department miscalculates the payroll tax due at year-end, resulting in an
inaccurate liability
The accountant unintentionally records amounts as revenue that were prepaid by
customers but not yet earned
Which internal control is intended to ensure that a company does not mistakenly pay a
supplier for an invoice that includes more items than were actually received? - (correct
