Chapter 8 - Accounting

b. variable costs

_____ are costs that are directly affected by the level of production a. Insurance costs b. Variable costs c. Fixed costs d. Implicit costs

a. accounting

_____ is a system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization. a. Accounting b. Budgeting c. Banking d. Financing

b. activity-based costing

_____ is a technique to assign product costs based on links between a company's undertakings that drive costs and the production of specific products: a. Job-order costing b. Activity-based costing c. Historical costing d. Uniform costing

d. implicit cost

_____ is the cost that arise when a firm uses owner-supplied, non-monetary resources a. Out-of-pocket cost b. Tangible cost c. Procurement cost d. Implicit cost

_____ is the difference between the revenue a firm earns and the expenses it incurs in a given time period. a. Gross margin b. Gross domestic product c. Net income d. Earnings before interest and tax c. net income

_____ is the difference between the revenue a firm earns and the expenses it incurs in a given time period. a. Gross margin b. Gross domestic product c. Net income d. Earnings before interest and tax

c. net income

_____ is the difference between the revenue a firm earns and the expenses it incurs in a given time period. a. gross domestic product b. earnings before interest and tax c. net income d. gross margin

a. expenses

_____ refer to the resources that are used up as a result of business operations. a. Expenses b. Revenues c. Profits d. Liabilities

a. stockholder's equity

_____ refers to the claims owners have against their firm's assets. a. Stockholder's equity b. Wages payable c. Current asset d. Accounts receivable

b. accrual-basis accounting

_____ refers to the method of accounting that recognizes revenue when it is earned and matches expenses to the revenue they helped produce. a. Forensic accounting b. Accrual-basis accounting c. Cash-basis accounting d. Management accounting

b. indirect costs

______ tend to be the result of a firm's general operations rather than the production of any specific product a. Direct costs b. Indirect costs c. Explicit costs d. Implicit costs

a. identifies a firm's planned investments in major fixed assets and long-term projects

a capital expenditure budget: a. identifies a firm's planned investments in major fixed assets and long-term projects. b. contains the budgets for direct labor, direct materials, and overhead costs. c. identifies short-term fluctuations in cash flows that display cash deficits and surpluses. d. provides quarterly estimates of the number of units of each product a firm expects to sell.

out-of-pocket cost

a cost that involves the payment of money or other resources

balance sheet

a financial statement that reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owners' equity

b. differentiates the budgeted costs for each sales level

a flexible budget: a. cannot be used for evaluating real-world sales situations. b. differentiates the budgeted costs for each sales level. c. is based on a single assumed level of sales. d. is the budget that is prepared before a static budget.

budgeting

a management tool that explicitly shows how a firm will acquire and use the resources needed to achieve its goals over a specific time period

master budget

a presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specific time period

generally accepted accounting principles (gaap)

a set of accounting standards that is used in the preparations of financial statements

accounting

a system for recognizing, organizing, analyzing, and reporting information about the financial transactions that affect an organization

activity-based costing (abc)

a technique to assign product costs based on links between activities that drive costs and the production of specific products

horizontal analysis

analysis of financial statements that compares account values reported on these statements over two or more years to identify changes and trends

c. explanatory notes

annual reports include _____ that disclose additional information about a firm's operations and special circumstances that clarify and supplement the numbers reported on the financial statements. a. employee testimonials b. future projections c. explanatory notes d. SEC opinions

accounting equation

assets = liabilities + owner's equity

operating budgets

budgets that communicate an organization's sales and production goals and the resources needed to achieve these goals

a. operating budgets

budgets that communicate an organization's sales and production goals and the resources needed to achieve these goals are known as _____. a. operating budgets b. financial budgets c. planning budgets d. revenue budgets

financial budgets

budgets that focus on the firm's financial goals and identity the resources needed to achieve these goals

liabilities

claims that outsiders have against a firm's assets

b. can be used to find out whether owner's equity has increased

comparative financial statements: a. are mandatory for companies that are not publicly traded. b. can be used to find out whether owners' equity has increased. c. provide comparisons of the financial statements of two competitors. d. are primarily used to analyze the current liabilities of a company.

direct costs

costs that are incurred directly as the result of some specific cost object

indirect costs

costs that are the result of a firm's general operations and are not directly tied to any specific cost object

fixed costs

costs that remain the same when the level of production changes within some relevant range

variable costs

costs that vary directly with the level of production

b. provides information mainly for investors, creditors, and regulators

financial accounting: a. provides information for internal stakeholders such as executives. b. provides information mainly for investors, creditors, and regulators c. does not adhere to generally accepted accounting practices. d. provides detailed information about a company's various divisions

b. preparation of financial statements

generally accepted accounting principles is a set of accounting standards that is used in the: a. assessment of export taxes. b. preparation of financial statements c. evaluation of employee payroll. d. conversion between the currencies of different nationalities.

d. account values reported on financial statements over two or more years

horizontal analysis is the comparison of: a. sales figures of different divisions of a firm over one financial quarter. b. reported account values of two different firms in the same financial year. c. stakeholders' equity values for each owner in the same financial year. d. account values reported on financial statements over two or more years

a. sever all ties with any firms or institutions they served prior to joining the board

in order to preserve independence and impartiality, fasb members are required to: a. sever all ties with any firms or institutions they served prior to joining the board. b. pass a rigorous two-day, four-part examination on major accounting concepts. c. sign a non-disclosure agreement and swear an oath of allegiance to the board. d. be members of the Securities and Exchange Commission (SEC) before joining the board.

a. Securities and Exchange Commission (SEC)

in the United States, the _____ has the ultimate legal authority to set and enforce accounting standards. a. Securities and Exchange Commission (SEC) b. U.S. Department of the Treasury (DOT) c. Financial Accounting Standards Board (FASB) d. Internal Revenue Service (IRS)

revenue

increases in a firm's assets that result from the sale of goods, provision of services, or other activities intended to earn income

b. analysis, reports, and financial statements for a company

management accountants provide: a. accounting services for local government agencies. b. analysis, reports, and financial statements for a company. c. auditing assistance to the Internal Revenue Service. d. services such as management consulting to clients for a fee.

b. external auditor

melissa has been contracted to examine the books of accounts of Sanborn Corporation. After she has checked the figures and examined the company's accounting methods, she is required to prepare a report on her findings. The work that Melissa is tasked with is that of a(n) _____. a. fraud examiner b. external auditor c. whistle-blower d. management accountant

d. actual payment of money or other resources

out-of-pocket costs involve the _____ a. opportunity cost that arises when a firm uses owner-supplied resources b. costs that vary directly with the level of production c. costs that remain the same when the level of production changes within some relevant range d. actual payment of money or other resources

assets

resources owned by a firm

expenses

resources that are used up as the result of business operations

b. profit and loss statement

the _____ is a financial statement that reports revenues, expenses, and net income that resulted from a firm's operations over an accounting period. a. statement of current liabilities b. profit and loss statement c. articles of incorporation d. statement of stockholders' equity

d. statement of financial position

the _____ reports the financial position of a firm by identifying and reporting the value of the firm's assets, liabilities, and owner's equity. a. profit and loss statement b. statement of cash flows c. statement of retained earnings d. statement of financial position

d. statement of cash flows

the ______ refers to the financial statement that identifies a firm's sources and uses of money in a given accounting period. a. profit and loss statement b. statement of retained earnings c. stockholders' equity statement d. statement of cash flows

financial accounting

the branch of accounting that prepares financial statements for the use by owners, creditors, suppliers, and other external stakeholders

managerial (or management) accounting

the branch of accounting that provides reports and analysis to managers to help them make informed business decisions

a. short-term fluctuations in cash flow

the cash budget is a financial budget document that identified: a. short-term fluctuations in cash flow. b. sources of long-term cash reserves. c. the number of debtors to a company. d. long-term fluctuations in revenue.

owner's equity

the claims a firm's owner have against their company's assets (often called "stockholder's equity" on balance sheets of corps)

net income

the difference between the revenue a firm earns and the expenses it incurs in a given time period

d. budgeted income statement

the document created in the final stage of an operating budget is the _____. a. capital expenditure budget b. cash budget c. budgeted balance sheet d. budgeted income statement

d. generally accepted accounting principles

the financial accounting standards board establishes the _____ used in the practice of financial accounting a. yearly budgeting rules and principles b. intra-organizational accounting principles c. financial auditing methods and principles d. generally accepted accounting principles

statement of cash flows

the financial statement that identifies a firm's source and uses of cash in a given accounting period

income statement

the financial statement that reports revenues, expenses, and net income that resulted from a firm's operations over an accounting period

d. "language of business"

the heavy reliance on accounting information by business stakeholders has led to it sometimes being called the: a. "cornerstone of business." b. "standard of business." c. "lifeblood of business." d. "language of business."

accrual-basis accounting

the method of accounting that recognizes revenue when it is earned and matches expenses to the revenues they helped produce

implicit cost

the opportunity cost that arises when a firm uses owner-supplied resources

financial accounting standards board (fasb)

the private board that establishes the generally accepted accounting principles used in the practice of financial accounting

c. public company accounting oversight board

the sarbanes-oxley act established a private-sector nonprofit corporation known as the _____. a. Public Enterprise Accounting Regulation Agency b. Private Enterprise Accounting Regulation Agency c. Public Company Accounting Oversight Board d. Private Company Accounting Oversight Board

cost

the value of what is given up in exchange for something

a. relevant, reliable, consistent, and comparable

through the gaap, the fasb aims to ensure that financial statements are _____ a. relevant, reliable, consistent, and comparable b. circumstantial, inferential, presumptive, and provisional c. cursory, intensive, unabridged, and superficial d. comprehensive, exhaustive, extensive, and independent

a. middle managers overstate their budgetary requirements

which of the following best describes budgetary slack in the context of bottom-up budgeting? a. Middle managers overstate their budgetary requirements. b. Middle managers set high budget goals to make their jobs easier. c. Middle managers do not participate in the budgeting process. d. Middle managers ask for fewer resources than required.

a. the international accounting standards board (iasb)

which of the following bodies makes u.s. accounting practices more consistent with those in other nations along with the fasb? a. The International Accounting Standards Board (IASB) b. The Securities and Exchange Commission (SEC) c. The U.S. Federal Reserve (Fed) d. The Financial Accounting Foundation (FAF)

b. managerial accounting is primarily intended to provide information for internal stakeholders, whereas financial accounting is primarily intended to provide information to external stakeholders

which of the following is a difference between managerial and financial accounting? a. Managerial accounting focuses almost exclusively on financial information, whereas financial accounting provides both financial and nonfinancial information. b. Managerial accounting is primarily intended to provide information for internal stakeholders, whereas financial accounting is primarily intended to provide information to external stakeholders. c. Managerial accounting presents financial statements on a predetermined schedule, whereas financial accounting creates reports upon request by management than according to a predetermined schedule. d. Managerial accounting prepares a standard set of financial statements, whereas financial accounting prepares customized reports to deal with specific problems or issues.

a. unions

which of the following is a key external user of a company's accounting information? a. unions b. employees c. departmental managers d. managers

a. property insurance premiums

which of the following is an example of a fixed cost? a. property insurance premium b. payments made to suppliers c. costs of raw material purchase d. shareholder dividend payments

d. An unqualified opinion is given if the independent auditor has no problems with the way a firm's financial statements were prepared and presented, whereas a qualified opinion is given if the independent auditor identifies minor concerns but believes that on balance a firm's statements are a fair representation of the company's financial position.

which of the following is true of an independent auditor's unqualified opinion and an independent auditor's qualified opinion? a. An unqualified opinion is given if the independent auditor identifies minor concerns but believes that on balance the firm's statements are a fair representation of the company's financial position, whereas a qualified opinion is given if the independent auditor discovers widespread and serious problems with a firm's statements. b. An unqualified opinion is given if the independent auditor discovers widespread and serious problems with a firm's statements, whereas a qualified opinion is given if the independent auditor has no problems with the way a firm's financial statements were prepared and presented. c. An unqualified opinion is given if the independent auditor identifies minor concerns but believes that on balance a firm's statements are a fair representation of the company's financial position, whereas a qualified opinion is given if the independent auditor has no problems with the way a firm's financial statements were prepared and presented. d. An unqualified opinion is given if the independent auditor has no problems with the way a firm's financial statements were prepared and presented, whereas a qualified opinion is given if the independent auditor identifies minor concerns but believes that on balance a firm's statements are a fair representation of the company's financial position.

a. it is more resource intensive than the top-down approach

which of the following is true of participatory budgeting? a. It is more resource intensive than the top-down approach. b. It demotivates the middle and first-line managers. c. It is less time consuming than the top-down approach. d. It excludes lower management in the budgeting process.

a. direct cost

while assigning costs to specific cost objects, if a particular cost can be precisely traced to the production of a product, it is a(n) _____ a. direct cost b. explicit cost c. indirect cost d. implicit cost