Principles of Financial and Managerial
Accounting - D196 Multiple Choice
Question and answers verified to pass
2025
Accounting plays a vital role in the decision-making process. Which action is
the first step in the decision-making process?
a. Identify the issue.
b. Identify the alternatives.
c. Guarantee a good outcome.
d. Gather information. - correct answer ✔a. Identify the issue.
Identifying the issue is the first step in the decision-making process.
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?
a. Taxes, investors, and retained business earnings
b. Employees, investors, and retained business earnings
c. Gross business earnings, employees, and taxes
d. Investors, creditors, and retained business earnings - correct answer ✔d.
Investors, creditors, and retained business earnings
Investors, creditors, and retained business earnings are all common sources
of capital for a business.
True or False: Accountants measure and communicate the results of business
activities.
,a. True
b. False - correct answer ✔a. True
Accountants measure and communicate (report) the results of business
activities—in other words, accountants keep score. To measure these results
accurately, accountants follow a standard set of procedures referred to as the
accounting cycle.
Which primary area of accounting generates reports for internal users?
a. Financial accounting
b. Governmental accounting
c. Management accounting
d. General-purpose accounting - correct answer ✔c. Management
accounting
Management accounting generates reports for internal users, such as budgets
and cost analyses.
Which group uses financial information to evaluate whether a company will be
able to repay a loan?
a. Management
b. Lenders
c. Employees
d. Investors - correct answer ✔b. Lenders
Lenders are interested in whether or not a company will be able to repay a
loan, so they use financial information to analyze the company's financial
ability to do so.
,Which of the primary financial statements reports the resources, obligations,
and owner's equity of a company?
a. Balance sheet
b. Income statement
c. Master budget
d. Statement of cash flows - correct answer ✔a. Balance sheet
The balance sheet reports the resources of a company (the assets), the
company's obligations (the liabilities), and the owners' equity, which
represents the difference between what is owned (assets) and what is owed
(liabilities).
What is the role of the IASB in regulating accounting standards?
a. Work as a subcommittee of the American Institute of Certified Public
Accountants (AICPA) to regulate accounting instruction
b. Establish international accounting standards
c. Work under the direction of the SEC to establish financial accounting
standards
d. Use legal authority to establish financial accounting standards for U.S.
companies - correct answer ✔b. Establish international accounting standards
The IASB establishes worldwide accounting standards. The IASB is a private
organization based in London. Currently, the IASB does not have legal
authority to set accounting standards for U.S. companies, although the SEC
does allow the use of IASB standards for non-U.S. companies with shares
traded on U.S. stock exchanges. The IASB is a standalone organization
(overseen by a Board of Trustees); it is not under the jurisdiction of the SEC,
the European Union, the United Nations, or any other governmental body. The
IASB members represent a broad business constituency including auditors,
corporate accountants, analysts, and even accounting professors.
, What group of people make up the FASB?
a. Financial accounting specialists appointed by the U.S. Congress
b. Senior IRS staff members
c. Senior SEC staff members
d. People from a variety of business-related backgrounds - correct answer
✔d. People from a variety of business-related backgrounds
Historically, FASB members have represented a broad business constituency
including auditors, corporate accountants, analysts, and accounting
academics. The FASB is not directly controlled by the SEC, although SEC
input is extremely important to the FASB in its deliberations.
What is the role of the GASB in setting accounting standards?
a. The GASB establishes accounting and reporting standards together with
the IRS.
b. The GASB establishes accounting and reporting standards together with
the SEC.
c. The GASB is a private-sector organization that establishes accounting and
financial reporting standards for U.S. state and local governments.
d. The GASB establishes accounting and financial reporting standards
together with the IASB. - correct answer ✔c. The GASB is a private-sector
organization that establishes accounting and financial reporting standards for
U.S. state and local governments.
The GASB sets accounting standards for state and local governments in the
United States.
In what way do accountants have an economic incentive to conduct
themselves ethically?
Accounting - D196 Multiple Choice
Question and answers verified to pass
2025
Accounting plays a vital role in the decision-making process. Which action is
the first step in the decision-making process?
a. Identify the issue.
b. Identify the alternatives.
c. Guarantee a good outcome.
d. Gather information. - correct answer ✔a. Identify the issue.
Identifying the issue is the first step in the decision-making process.
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?
a. Taxes, investors, and retained business earnings
b. Employees, investors, and retained business earnings
c. Gross business earnings, employees, and taxes
d. Investors, creditors, and retained business earnings - correct answer ✔d.
Investors, creditors, and retained business earnings
Investors, creditors, and retained business earnings are all common sources
of capital for a business.
True or False: Accountants measure and communicate the results of business
activities.
,a. True
b. False - correct answer ✔a. True
Accountants measure and communicate (report) the results of business
activities—in other words, accountants keep score. To measure these results
accurately, accountants follow a standard set of procedures referred to as the
accounting cycle.
Which primary area of accounting generates reports for internal users?
a. Financial accounting
b. Governmental accounting
c. Management accounting
d. General-purpose accounting - correct answer ✔c. Management
accounting
Management accounting generates reports for internal users, such as budgets
and cost analyses.
Which group uses financial information to evaluate whether a company will be
able to repay a loan?
a. Management
b. Lenders
c. Employees
d. Investors - correct answer ✔b. Lenders
Lenders are interested in whether or not a company will be able to repay a
loan, so they use financial information to analyze the company's financial
ability to do so.
,Which of the primary financial statements reports the resources, obligations,
and owner's equity of a company?
a. Balance sheet
b. Income statement
c. Master budget
d. Statement of cash flows - correct answer ✔a. Balance sheet
The balance sheet reports the resources of a company (the assets), the
company's obligations (the liabilities), and the owners' equity, which
represents the difference between what is owned (assets) and what is owed
(liabilities).
What is the role of the IASB in regulating accounting standards?
a. Work as a subcommittee of the American Institute of Certified Public
Accountants (AICPA) to regulate accounting instruction
b. Establish international accounting standards
c. Work under the direction of the SEC to establish financial accounting
standards
d. Use legal authority to establish financial accounting standards for U.S.
companies - correct answer ✔b. Establish international accounting standards
The IASB establishes worldwide accounting standards. The IASB is a private
organization based in London. Currently, the IASB does not have legal
authority to set accounting standards for U.S. companies, although the SEC
does allow the use of IASB standards for non-U.S. companies with shares
traded on U.S. stock exchanges. The IASB is a standalone organization
(overseen by a Board of Trustees); it is not under the jurisdiction of the SEC,
the European Union, the United Nations, or any other governmental body. The
IASB members represent a broad business constituency including auditors,
corporate accountants, analysts, and even accounting professors.
, What group of people make up the FASB?
a. Financial accounting specialists appointed by the U.S. Congress
b. Senior IRS staff members
c. Senior SEC staff members
d. People from a variety of business-related backgrounds - correct answer
✔d. People from a variety of business-related backgrounds
Historically, FASB members have represented a broad business constituency
including auditors, corporate accountants, analysts, and accounting
academics. The FASB is not directly controlled by the SEC, although SEC
input is extremely important to the FASB in its deliberations.
What is the role of the GASB in setting accounting standards?
a. The GASB establishes accounting and reporting standards together with
the IRS.
b. The GASB establishes accounting and reporting standards together with
the SEC.
c. The GASB is a private-sector organization that establishes accounting and
financial reporting standards for U.S. state and local governments.
d. The GASB establishes accounting and financial reporting standards
together with the IASB. - correct answer ✔c. The GASB is a private-sector
organization that establishes accounting and financial reporting standards for
U.S. state and local governments.
The GASB sets accounting standards for state and local governments in the
United States.
In what way do accountants have an economic incentive to conduct
themselves ethically?
