Accounting 101: Chapter 1 Test Banks

Generally accepted accounting principles are intended to assist accountants in preparing financial statements that:

*A. Are relevant, reliable, comparable, and understandable*

The accounting systems of most business organizations:

*A. Are tailored to meet the organization's needs for accounting information*

The basic purpose of an audit is to:

*A. Assure financial statements are in conformity with GAAP*

A strong internal control structure:

*A. Contributes to the accuracy and reliability of the accounting records.*

Which of the following is NOT considered a return "of" investment?

*A. Dividends*

Which of the following is considered a return "on" investment?

*A. Dividends*

The primary function of external auditors is to:

*A. Express an opinion on the fairness and reliability of the company's financial statements*

Which of the following is generally NOT considered one of the general purpose financial statements issued by a corporation?

*A. Income statement forecast for the coming year*

Objectives of financial reporting to external investors and creditors include preparing information about all of the following EXCEPT:

*A. Information used to determine which products to produce*

Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the information needs of:

*A. Investors and creditors*

The objectives of an accounting system include all of the following EXCEPT:

*A. Investors*

Characteristics of internal accounting information include all of the following except:

*A. It is audited by a CPA*

Which of the following is a characteristic of financial accounting information?

*A. It's preparation requires judgement*

The work of accountants practicing in public accounting may best be described as:

*A. Providing various types of accounting services to a wide variety of clients*

Which financial statement is prepared as a of a specific date?

*A. The balance sheet*

Which financial statement is primarily concerned with reporting the financial position of a business at a particular time?

*A. The balance sheet*

The auditor's report on the published financial statements of a large corporation should be viewed as:

*A. The opinion of independent experts as to the overall fairness of the statements*

In the phrase "generally accepted accounting principles," the words accounting principles refers to:

*A. The standards, assumptions, and concepts that serve as "ground rules" for financial reporting*

Which of the following is NOT an objective of generally accepted accounting principles?

*A. To minimize the amount of income taxes owed*

Suppose a number of your friends have organized a company to develop and sell a new software product. They have asked you to loan them $8,000 to help get the company started, and have promised to repay your $8,000 plus 10% interest in one year. Of the following, which amount may be described as the return on your investment?

*B. $800*

Which organization best serves the professional needs of a CPA?

*B. AICPA*

Which of the following is true?

*B. Federal securities laws regarding the issuance of misleading financial statements apply not only to the independent auditors, but to management of the company as well*

The accounting standards and concepts used in the preparation of financial statements are called:

*B. Generally accepted accounting principles (GAAP)*

The set of standards, assumptions, and concepts that form the "ground rules" for financial reporting in the United States is termed:

*B. Generally accepted accounting principles*

The general purpose the financial statements are prepared annually by a corporation would NOT include the:

*B. Income tax return*

Investors may be described as:

*B. Individuals and enterprises that own a reporting entity business*

The principal difference between management accounting and financial accounting is that financial accounting information is:

*B. Intended primarily for the use by decision makers outside the business organization*

Which of the following does NOT describe accounting?

*B. It is an end rather than a means to an end*

The basic purpose of generally accepted accounting principles is to:

*B. Provide a framework for financial reporting that is understood by both the preparers and the users of financial statements*

The financial statements of a business entity:

*B. Provide information about the cash flow prospects of the company*

Financial statements are designed primarily to"

*B. Provide people outside the business organization with information about the company's financial position and operating results*

The designation of CPA is given by:

*B. States*

Which of the following is NOT a characteristic of financial accounting?

*B. The information is confidential and is intended for use only by company management*

The Financial Accounting Standards Board is:

*C. A private group that conducts research and issues Statements that represent authoritative expressions of generally accepted accounting principles*

In the phrase "generally accepted accounting principles," the words generally accepted mean that the principles:

*C. Are understood and observed by all the participants in the financial reporting process*

Which of the following has the LEAST impact upon the reliability of financial statements issued by publicly owned corporations?

*C. Audits of the financial statements by the Internal Revenue Service*

Generally accepted accounting principles

*C. Both A & B* - Originate from a combination of tradition, experience and official decree - May change over time

Investors and creditors are interested in the probability that their original investment or loan will eventually be returned, and that they will receive a reasonable return while their funds are invested or borrowed. These expectations are collectively referred to as:

*C. Cash flow prospects*

Overseeing a company's affairs to ensure that the company is managed with the best interest of shareholders in mind is called:

*C. Corporate governence*

Which of the following is not a user of internal accounting information?

*C. Creditor*

Financial statements may be prepared for

*C. Either A or B* - One year - Less than one year

An accounting principle must receive substantial authoritative support to qualify as generally accepted. Among the organizations and agencies that have been influential in the development of generally accepted accounting principles, which of the following has provided the MOST influential leadership?

*C. Financial Accounting Standards Board*

All of the following are characteristics of management accounting, EXCEPT:

*C. Information must be developed in conformity with generally accepted accounting principles or with income tax regulations*

Financial accounting information is characterized by all of the following EXCEPT:

*C. It is factual, so it does not require judgment to prepare*

The FASB takes on a responsibility to do the following, EXCEPT:

*C. Judge disputes between management and the CPA*

Financial statements are prepared:

*C. Primarily for the benefit of persons outside of the business organization*

Of the following objectives of financial reporting, which is the MOST specific?

*C. Provide information about economic resources, claims to resources, and changes in resources and claims*

The basic purpose of bookkeeping is to:

*C. Record the financial transactions of an economic entity*

A complete set of financial statements for Citywide Company, at December 31, 2009, would include each of the following, EXCEPT:

*C. Statement of projected cash flows for 2009*

The Sarbanes-Oxley Act of 2002 created:

*C. The Public Company Accounting Oversight Board*

The field of accounting may best be described as:

*C. The art of interpreting, measuring, and describing economic activities*

Which of the following decision makers is LEAST likely to be among the users of management accounting reports developed by Sears Roebuck and Co?

*C. The manager of a mutual fund considering investing in Sears' common stock*

The best definition of an accounting system is:

*C. The personnel, procedures, devices, and records used by an entity to develop accounting information and communicate this information to decision makers*

Information is cost effective when:

*C. The value of information exceeds the cost of producing it*

Which of the following is NOT a basic function of an accounting system?

*C. To ensure that a business organization will be managed profitably*

Which of the following are important factors in ensuring the integrity of accounting information?

*D. All of the Above* - Institutional factors, such as standards for preparing information - Professional organizations, such as the American Institute of CPA's - Competence, judgment, and ethical behavior and individual accountants

The code of ethics of the American Institute of Certified Public Accountants includes requirements in which of the following areas?

*D. All of the Above* - The Public Interest - Objectivity - Independence

Which of the following would NOT be considered a user of financial information?

*D. All of the above are considered interested in financial information* - A large pension fund - A real estate investor - Company management

To understand and use accounting information in making economic decisions, you must understand:

*D. All of the above* - The nature of economic activities that accounting information describes. - The assumptions and measurement techniques involved in developing accounting information. - Which information is relevant for a particular type of decision that is being made.

The objectives of financial reporting are to provide information

*D. All of the above* - that is useful for assessing cash flow prospects - about claims to enterprise resources - that is useful in investment and credit decisions

Financial accounting information is

*D. All of the above* - Designed to assist investors and creditors - Used by managers and in income tax returns - Called "general-purpose" accounting information

It is the function of management accounting to perform the following activities, except:

*D. Audited financial statements*

In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a management accounting report is MORE likely to:

*D. Be tailored to the specific needs of an individual decision maker*

Which of the following is generally NOT considered an external user of accounting information?

*D. Factory managers*

Generally accepted accounting principles are the "ground rules" used in the preparation of:

*D. Financial statements*

Audits of financial statements are performed by:

*D. Independent certified public accountants (CPas).

Which of the following is NOT recognized as a source of generally accepted accounting principles?

*D. None of the above. Generally accepted accounting principles may arise from each of these sources* - Widespread and long-term use of a particular practice. - The Financial Accounting Standards Board (FASB). - The American Institute of Certified Public Accountants (AICPA).

The principal function of CPAs is to:

*D. Perform audits to determine the fairness and reliability of a company's financial statements*

Management accountants primarily are concerned with developing information:

*D. Suited to the needs of decision makers WITHIN the organization*

The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner are collectively referred to as:

*D. The internal control structure*

Which of the following events is NOT a transaction that would be recorded in a company's accounting records?

*D. the death of a key executive*

Security and Exchange Commission

Government agency that regulates financial reporting by publicly- held companies.

American Institute of CPAs

Organization which develops formal standards for auditing in the United States.

Financial Accounting Standards Board

Private organization most directly involved in the development and issuance of accounting standards.