BUSINESS PRINCIPLE (14)
Which of the following has the highest liquidity?
current assets
Which type of accountant would be available to businesses or individuals on a fee basis?
public accountant
CPA exams are established by the ______ _________ of Certified Public Accountants.
American Institute
In a statement of cash flows, what activity of the firm relates to cash used in or provided by the firm's investment activities? Multiple select question. (A) accounting (B) investments (C) operations (D) financing
B
True or false: Investments include cash transactions associated with running the business.
False
___________ refers to how fast an asset can be converted into cash.
Liquidity
Reviewing and evaluating records used to prepare a company's financial statements is referred to as ______.
auditing
The recording of business transactions is done by ______, whereas ______ classify and summarize financial data to help managers in decision-making.
bookkeepers; accountants
The ___________ line is another name for net income after taxes.
bottom
It's possible for a business to increase its sales and profits yet still suffer __________ ___________ problems.
cash flow
Assets that can or will be converted into cash within one year are termed ______.
current assets
Accumulated earnings from a firm's profitable operations that are reinvested in the business and not paid to stockholders are
retained earnings
What is another name for debts?
liabilities
The ease with which an asset can be converted to cash is called ______. Multiple select question. (A) conversion (B) liquidity (C) solvency (D) depreciation
B
Which three components make up the fundamental accounting equation? Multiple select questions. (A) income (B) expenses (C) liabilities (D) assets (E) owners' equity
C D E
If an individual passes a rigorous examination established by the AICPA and meets a state's educational and experience requirements, they can be recognized as a(n) ______.
CPA
A current bill that a company owes to others that is the result of buying merchandise on credit is called ______.
accounts payable
The ___________ of ___________ ____________ measures the cost of merchandise the firm sells or the materials and supplies used to manufacture them for sale.
cost/good sold
A ___________ accountant is trained in tax law and is responsible for preparing tax returns or developing tax strategies.
tax
What type of accountant is most likely to develop strategies for a firm in dealing with the Internal Revenue Service?
tax accountant
The _________________ statement summarizes revenues, costs, and expenses over a specific period, which may be a week, a month, or a year.
income
Which financial statement summarizes revenues, costs, and expenses for a specific period?
income statement
Bank, travel, and entertainment records will be found in which segment of the accounting system?
inputs
In operating a business, rent, salaries, supplies, utilities and insurance are all examples of ______.
operating expenses
The value of what stockholders own in a firm minus any liabilities is called ______.
owners' equity
Current liabilities involving money owed to others but not yet paid is referred to as accounts ________________
payable
The downfall of Arthur Andersen was related to which scandal?
the Enron scandal
A journal is the place where ______.
transactions are first recorded
Assets, liabilities, and owners' equity are the major accounts listed on ______.
a balance sheet
The first step in the accounting cycle is to ______.
analyze source documents
The "bottom line" is ______. Multiple select questions. (A) net income or loss after taxes (B) the last line on the balance sheet (C) the last line on the income statement (D) the last line on the statement of cash fl
A C
A CPA must ______. (Select all that apply) Multiple select questions. (A) meet a state's requirements for education and experience (B) pass a test every year (C) be a public accountant or an internal auditor (D) pass a series of exams
A D
An accounting system is used to ______. Multiple choice question. (A) generate employee wages and benefits (B) record sales transactions and generate customer receipts (C) distribute a company's investments evenly (D) record and summarize accounting data into reports
D
How do cash flow problems usually start?
The firm uses up its credit.
A major purpose of _____________ is to help managers evaluate the financial condition and the operating performance of the firm.
accounting
Recording, classifying, summarizing, and interpreting financial events in an organization is referred to as ______.
accounting
The relationship among assets, liabilities, and owners' equity is a fundamental concept in accounting known as the _______ equation.
accounting
Sales, purchasing, and shipping documents are all considered examples of _______ to an accounting system.
entries
Because they indicate a firm's financial health and stability, the use of ______ are key factors in management decision making.
financial statements
What is the term for all resources that come into the firm from operating activities?
revenue
The role of an auditor is to ______.
review and evaluate a company's financial information
Arthur Andersen was convicted of obstruction of justice for___________ records in the Enron case.
shredding
An advantage of the use of computers to maintain and compile accounting information is ______.
speed
Cash receipts and disbursements related to operations, investments, and financing are reported on the ______.
statement of cash flows
What are the major categories on the balance sheet? (Select all that apply) Multiple select questions. (A) liabilities (B) owners' equity (C) retained earnings (D) assets (E) cash balance
A B D
True or false: Financial accounting provides information to people inside of an organization, whereas managerial accounting provides information to people outside of an organization.
False
Examples of current assets include ______.
accounts receivable and inventory
Match the common liability account with its correct description.
ACCOUNTS PAYABLE - current liabilities that the company owes others NOTES PAYABLE - short or long term liabilities that the business promises to pay by a certain date BONDS PAYABLE - long-term liabilities; money lent to the firm that must be paid back
The method a company uses to record and summarize accounting data into reports is a(n) ______.
accounting system
Jayleen works for her firm preparing and analyzing its financial statements. She would be called a(n) ______ accountant.
private
The key financial statements of a business are the balance sheet, the income statement, and the ______.
statement of cash flows
What are the key financial statements of a business? (Select all that apply) Multiple select questions. (A) annual report (B) statement of cash flows (C) income statement (D) trial balance (E) balance sheet
B C E
If financial management is the heartbeat of competitive businesses, what keeps that heartbeat stable?
accounting information
What are retained earnings?
accumulated earnings not paid out to stockholders
Stakeholders who want to look at detailed financial information on whether a company is profitable, is able to pay its bills, and how much debt it owes will look at the firm's ______.
annual report
The ________ _______ provides information about a company's financial status to company managers, owners, government agencies, and the general public.
annual report
The key working areas of accounting include managerial accounting, financial accounting, tax accounting, government and nonprofit accounting, and _______________
auditing
The ability to read, understand, and analyze accounting reports and financial statements is critical in understanding ______.
business operations
The statement of cash flows is a financial statement that shows ______.
cash receipts and disbursements
An accountant's time is freed up to do more important tasks such as financial analysis due to the assistance provided by using ______.
computerized accounting programs
What term describes the cost of merchandise the firm sells?
cost of goods sold
The definition of accounts payable is ______.
current liabilities involving money owed to others but not yet paid for
The best way to understand a firm's financial health and stability is to look at its ______.
financial statements
____________ and nonprofit accounting supports organizations whose purpose is not generating a profit, but serving ratepayers, taxpayers, and others according to a duly approved budget.
government
Managerial accounting is used to provide information ______.
inside the firm
___________ are cash used in or provided by the firm's investment activities.
investment
A(n) _________ is a record book or computer program where accounting data are first entered.
journal
Transactions that are entered in the journal are then posted to specific categories in a(n) ______.
ledger
What is the term given to a specialized accounting book or computer program in which information is transferred into specific categories, so managers can find all the information about a single account in one place?
ledger
Debts, known for accounting purposes as ______________, are what the business owes to others.
liabilities
Arthur Andersen was convicted of ______.
obstruction of justice
Rent, salaries, supplies, utilities, and insurance are examples of _________ expenses that are general expenses.
operating
Financial accounting and managerial accounting differ in terms of who uses the information. Financial accounting provides information primarily for ______.
people outside the organization
Select the items that are inputs to the accounting system? (Select all that apply) Multiple select questions. (A) shipping documents (B) sales documents (C) payroll records (D) income statement (E) statement of cash flows
A B C
Which of the following are considered disciplines within the accounting profession? (Select all that apply) Multiple select questions. (A) tax accounting (B) financial accounting (C) managerial accounting (D) investment accounting
A B C
Which are considered to be the working areas of accounting? (Select all that apply) Multiple select question. (A) financial accounting (B) bank accounting (C) tax accounting (D) auditing (E) government and not-for-profit accounting (F) managerial accounting
A B D E F
What are two major purposes of accounting? Multiple select question. (A) to help managers make well-informed decisions (B) to provide economic predictions by which to guide the firm (C) to determine the strength of the firm's stakeholders (D) to report financial information to interested stakeholders
A D
What are the three common liability accounts recorded on a balance sheet? Multiple select question. (A) accounts payable (B) accounts receivable (C) retained earnings (D) notes payable (E) bonds payable
A D E
__________ _________ is the yearly statement of the firm's financial condition, progress, and expectations provided to stakeholders.
Annual report
Stockholders, or owners' equity represents ______. Multiple choice question. (A) the value of the corporate stock on the market (B) the value of the business that belongs to owners (C) the amount the owners owe in debt (D) the total value of what a business owns
B
The information and analysis that comes from managerial accounting is used to ______. Multiple choice question. (A) provide information to potential investors of the firm (B) assist managers inside the organization with their decision making (C) audit the firm's business activities and verify the accuracy of financial statements (D) prepare tax returns and financial statements required by the IRS
B
Which three activities are part of the function of accounting? Multiple select question. (A) prioritizing financial transactions (B) classifying financial transactions (C) recording financial transactions (D) interpreting financial transactions (E) planning financial transactions
B C D
Which are steps in the accounting cycle? (Select all that apply) Multiple select questions. (A) build a budget (B) record transaction in the journal (C) determine investment opportunities (D) prepare a trial balance (E) analyze transactions
B D E
The purpose of the Financial Accounting Standards Board is to ______. Multiple choice question. (A) certify management accountants (B) certify private accountants (C) define generally accepted accounting principles (D) regulate and inspect the accounting departments of organizations
C
___________ accounting generates financial information for people outside the firm, while ____________ accounting generates financial information for people inside the firm.
Financial/managerial
True or false: The Financial Accounting Standards Board defines the generally accepted accounting principles that accountants must follow.
True
Through the recording, classifying, summarizing, and interpretation of financial events in an organization, the function of ______ helps managers make good decisions about the firm's operations.
accounting