Chapter 15

Liabilities must equal assets plus owners' equity.

A balance sheet has all of the following characteristics, except:

cost of goods sold

A company selling goods subtracts ___from sales to determine gross profit.

audit

A company will request a(n) ______ when it wants to determine if its financial statements have been prepared in accordance with generally accepted accounting principles.

certified public accountant

A_____ is an individual who has met state requirements for accounting education and experience and has passed a rigorous accounting examination.

Accounting firms can provide many types of nonaudit and consulting services to the companies that they audit.

All of the following are key components of the Sarbanes-Oxley Act, except:

Cost accounting

As part of the accounting process, employees provide managers and employees within the organization with information needed to determine the cost of producing specific products or services. This information is used to evaluate current expenses and to compare them to historic data, international data, and data from suppliers, subcontractors (if any), and other processers (if any) to determine if a less expensive alternative is available that will generate the same product quality. What specific type of accounting is being performed in the beginning of this process?

Sarbanes-Oxley Act

Because of several accounting scandals that led to the financial disintegration of large companies and the accounting firms that perpetrated the scandals, Congress enacted the_____ .

risk.

During the meeting with Kevin, one of Commodore's auditors, he urges Ron to get his buyers to "take title" to products and to provide documentation before Ron "books and holds" the sales in advance of actual financial transactions. In this case, the auditor is seeking information to reduce

Operations manager

Firms require information on a variety of subjects so they can plan for the future, implement the plans, and evaluate the results against historical data. Which of the following managers needs information regarding future sales levels, current inventory levels, and the availability and cost of resources required to produce goods and services?

Current assets are assets that can be converted quickly into cash or that will be used in one year or less; fixed assets are assets that will be held or used for a period longer than one year.

How are current assets distinguished from fixed assets?

Income statement

If Ron agrees to use "book and hold" to boost his current month's sales and therefore the firm's revenues, which document used by investors, bankers, and others, will reflect this fact?

$130,000

If a business firm has assets worth $170,000 and liabilities that total $40,000, what is the value of the owners' equity?

Owners' equity

If a firm sold all of its assets and paid all of its bills, what would remain?

$130,000

If a retailer has revenues of $800,000, cost of goods sold that total $370,000, and operating expenses that total $300,000, what is its net income before taxes?

audit.

Kevin wants Ron to be able to provide physical documentation that his buyers will actually make the purchases he is going to "book and hold." These documents can support his accounting practices in creating financial statements in case an outside firm examines the company's financial statements called a(n)

annual report

Large corporations normally distribute a(n) _____ to stockholders and other interested parties that describes a firm's operating activities and its financial condition.

Marketing managers

Managers in each of the five areas of management need specific information in order to make decisions. Which manager needs to have detailed information about a firm's products and services and those offered by competitors?

fraud.

Pressure from superiors and investors or from media to make a firm's numbers "look good" in order to drive its stock upward can contribute to employees making poor choices. When a firm inflates sales or earnings or deflates expenses in its financial reporting, this organization is engaging in

owners' equity

The "Retained Earnings" account is one of the _____ accounts.

cost of goods sold

The amount of money a firm spent to buy or produce the products it sold during the period to which the income statement applies is:

Knowledge management

The collection of information about customers, such as their preferences, locations, demographics, and mobility is important for business success. Organizing and using this information is imperative to a business' survival. Which of the following describes a procedure for generating, using, and sharing important data and information?

current assets; current liabilities

The current ratio is calculated by dividing _____ by _____.

taxes.

The major activities of a firm, as shown on the statement of cash flows, include all of the following, except:

order merchandise in smaller quantities at more frequent intervals.

The quickest way to improve inventory turnover is to:

annual reports

Today, most corporations include in their ___ comparisons of the important elements of their financial statements for recent years.

Accounting

What function is an employee of a firm conducting when he or she systematically collects, analyzes, and reports the financial information to the company in the form required to make decisions about a firm's financing, investing, marketing, and operating activities?

Present the information to users

What function is being served by employees who take data from a management information system and compile it into a report that includes graphs, charts, and a PowerPoint presentation?

A management information system is a system that provides managers and employees with the information they need to perform their jobs as effectively as possible.

What is the best definition of a management information system?

Data are numerical or verbal descriptions that usually result from some sort of measurement. Information is data presented in a form that is useful for a specific purpose.

What is the difference between data and information?

statement of cash flows

When a company wants to determine how its operating, investing, and financial activities affect cash during an accounting period, it will have a ___prepared.

Intangible assets

When an individual invents a new product and patents it, a writer copyrights and publishes a book, or a company develops a symbol that represents it and has it registered as their own, they have created assets. What type of assets have they created?

human resources

When considering the specific information needed to make decisions, ______ managers consider current wage levels and benefits, legislation, and court decisions regarding employment.

Income statement

When determining if a company has a cash surplus or cash deficit at the end of a specific period of time, one would typically subtract the expenses from the income. This can also be done as the first step in creating a budget. What is the specific name given to the financial document created for a business that would state its profit or loss?

relevant information

When managers are selecting a management information system they must tailor it to the needs of the organization it serves. The information technology officer must make sure that the system provides ______ at a reasonable cost.

high; low

When the amount of available information is _______, managers tend to make better decisions; while, when the amount of information is _______, there is a high risk of making poor decisions.

Income statement

Which financial summary reports the firm's profitability over a particular period of time?

Information rule

Which of the following best describes a consistent pattern of cause and effect that can be used in an industry for creating a competitive edge over competitors and improving the firm's profits?

Cash on hand

Which of the following best describes the information provided by a statement of cash flows?

(Cash flows from operating activities + Cash flows from investing activities + Cash flows from financing activities) + Beginning cash balance

Which of the following determines the ending cash balance using the statement of cash flows?

A SWOT analysis

Which of the following is NOT a component of a typical business report?

Interprets the data with artificial intelligence

Which of the following is NOT a function performed by a management information system (MIS)?

GAAPs

Which of the following is best described as an accepted set of guidelines and practices for U.S. companies reporting financial information and for the accounting profession?

Statement of cash flows

Which of the following provides a summary of money coming into and going out of the firm that tracks a company's cash receipts and payments?

Current ratio

Which of the following should be used to evaluate a firm's ability to pay its current liabilities?

An expert system is a type of computer program that uses artificial intelligence to imitate a human's ability to think.

Which of the following statements best explains an expert system?

The lower the profit margin, the better the cost controls within the business.

Which of the following statements does not accurately describe profit margin (return on sales) for a business?

If an MIS is too large or too complex for the organization, then unused capacity and complexity do nothing but increase the cost of owning and operating the system.

Which statement best describes what might happen if a business has a management information system (MIS) that is not the right size for the firm?

Managerial accounting

Which type of accounting provides managers and employees with the information needed to make decisions about a firm's financing, investing, marketing, and operating activities?

A table

Which would be the best way to illustrate the number of salespeople in each region of the country, sales for different types of products, and total sales for all products?

Information

_____ is the presentation of raw numerical or verbal descriptions in a form that is useful for a specific purpose.