MIE 201 Chapter 14

Which of the following is an accurate statement regarding the role of an accountant? - An accountant's role is essentially the same as a bookkeeper - Accounting usually required coursework beyond a college accounting degree - Accountants are usually responsible for the routine, day-to-day transactions of a business - Accounting requires less training then does bookkeeping

- Accounting usually required coursework beyond a college accounting degree

Which three components make up the accounting equation? - Assets - Expenses - Income - Owners' equity - Liabilities

- Assets - Owners' equity - Liabilities

Which of the following accurately describe profit margin for a business? - It is computed by dividing net income by sales - The lower the profit marge, the better the cost controls within the business - It shows the overall percentage profit earned by a company - It is based solely upon data found on the balance sheet - The higher the profit margin, the higher the return on ever dollar of revenue for the business

- It is computed by dividing net income by sales - It shows the overall percentage profit earned by a company - The higher the profit margin, the higher the return on ever dollar of revenue for the business

In 2008 the US entered into a financial crisis. What three things did the federal government do to prevent the crisis from turning into a depression? - It passed the Dodd-Frank Act - It bailed out some of the largest banks - It passed the Sarbanes-Oxley Act - It bailed out many small, "mom-and-pop" shops - It allowed the FED to implement legislation regarding banks

- It passed the Dodd-Frank Act - It bailed out some of the largest banks - It allowed the FED to implement legislation regarding banks

Which of the following is NOT a characteristic of a balance sheet? - It presents a "snapshot" of the organization's financial position at a given moment - It states that liabilities must equal owners' equity - It indicates company assets and liabilities

- It states that liabilities must equal owners' equity

Select from the following those items that characterize a certified public accountant. - May file tax returns - Must be self-employed to avoid conflicts of interest - May provide opinions regarding the accuracy of financial statements - May complete audits of corporate financial records - Is certified through the federal government

- May file tax returns - May provide opinions regarding the accuracy of financial statements - May complete audits of corporate financial records

Which of the following terms are synonymous with "income statement"? - Balance sheet - Trial balance - P&L statement - Statement of cash flows - Operating statement

- P&L statement - Operating statement

External statements that managers in an organization may prepare are used for which of the following? - Planning the direction of the company - Reporting results to stockholders - Preparing the annual report - Obtaining credit from lenders - Filing income taxes

- Reporting results to stockholders - Preparing the annual report - Obtaining credit from lenders - Filing income taxes

What is the purpose of the Financial Accounting Standards Board? - To establish standards for financial accounting and reporting - To set standards for the education and certification of public accountants - To guide and educate the public on the use of financial information - To develop guidelines for use by government taxing organizations

- To establish standards for financial accounting and reporting - To guide and educate the public on the use of financial information

What are the three types of asset utilization ratios? - Total asset turnover - Receivables turnover - Retained earning turnover - Total liabilities turnover - Inventory turnover

- Total asset turnover - Receivables turnover - Inventory turnover

Select from the following the two formats of balance sheets. - Modern - Traditional - Equal - Parallel - Vertical

- Traditional - Vertical

Which two companies had a great deal to do with passage of the Sarbanes-Oxley Act? - KPMG - Worldcom - Enron - Ernst & Young - Fannie Mae

- Worldcom - Enron

Which three are examples of profitability ratios? - acid-test - return on assets - profit margin - return on equity - current ratio

- return on assets - profit margin - return on equity

Select from the following all the ways that managers and business owners use financial statements. - to hide company information from customers & creditors - to aid in internal planning and control - for reporting information to employees - to assist in reporting to the IRS

- to aid in internal planning and control - for reporting information to employees - to assist in reporting to the IRS

List the steps in the accounting cycle from beginning to end

1. Examine source documents 2. Record transactions 3. Post transactions 4. Prepare financial statements

Which of the following is the main distinguishing factor between accountants and bookkeepers? - Accountants analyze and interpret financial information and bookkeepers do not - Bookkeepers require additional training beyond a college accounting degree and accountants do not - Bookkeepers record financial information and accounts do not - Accounting is more mechanical and narrow in focus compared to bookkeeping

Accountants analyse and interpret financial information and bookkeepers do not

Organizations evaluate their operates through the recording, measurements, and interpretation of financial information. This process is known as ________.

Accounting

The balance sheet takes its name from it reliance on the _______.

Accounting equation

Amounts owed to suppliers for goods and services purchased with credit are called _______.

Accounts payable

Which of the following is an asset of a business?

Accounts receivable

An account representing all unpaid financial obligations incurred by the organization is an _______ _______ account.

Accrued expenses

The quick ratio is also known as the _______ _______.

Acid test

Selling expenses

Advertising and sales salaries

To be most effective, liquidity ratios should be examined in conjunction with ______.

Asset utilization ratios

Refrigerated display cases, commercial meat slicers, and walk-in cold storage units are _______ of Julie's Deli.

Assets

Double-entry bookkeeping strives to maintain the ________ of the accounting equation.

Balance

In the 2000s, the government intervened in the economy and bailed out some of the US' largest _______.

Banks

Cost of goods sold is calculated by using ________.

Beginning inventory, interim purchases, and ending inventory

Managers of most firms tend to keep debt-to-asset levels _______.

Below 50%

A(n) _______ is an internal financial plan that forecasts income and expenses of the organization for a set period of time.

Budget

Of utmost importance to management is/are _______, which is the movement of money through a firm on a daily, weekly, monthly, or yearly basis.

Cash flow

The amount of money a firm spent to buy or produce the products it sold during the accounting period is _______.

Cost of goods sold

Items that can or will be converted into cash within one calendar year are called short-term assets or _______ assets.

Current

_______ liabilities must be repaid within one year.

Current

A ratio indicating how much of the firm is financed by debt and how much by owners' equity is the definition of _______.

Debt to total assets ratio

The process of spreading the cost of a tangible asset over its estimated useful life is referred to as ________.

Depreciation

Forensic accountants act much like _______.

Detectives

Which of the follow ratios is important in determining a company's overall stock price? - Dividends per share - Debt to total assets ratio - Times interest earned ratio - Earning per share ratio

Earnings per share ratio

Owners' ________ includes all the money that has ever been contributed to a company that never has to be repaid.

Equity

The cost incurred in the day-to-day operations of an organization is known as _______.

Expenses

Which of the following set the principles of financial accounting and reporting in the private sector in the US? - SEC - FBI - IRS - FASB

FASB

Which type of assets are buildings, equipment, and intangible like patents and trademarks?

Fixed assets

There are more than 75,000 certified _______ examiners across the United States who work to root out evidence of "cooked books" in firms.

Fraud

Cash from financing activities is calculated _______.

From changes in the long term liability accounts and the contributed capital accounts in owners' equity

_______ is an intangible asset that often includes an organization's reputation.

Goodwill

Revenue minus the cost of goods sold is called gross _______ or ________.

Income, Profit

Sales divided by total inventory is called _______ turnover and this calculation indicated how many times a firm sells and replaces its inventory over the course of a year.

Inventory

Of the three major activities of a firm, the changes in the long-term asset accounts is accounted for in the cash from _______ activities.

Investing

Return on equity is called return on _______ and is calculated by dividing net income by owners' equity.

Investment

A(n) _______ is a time-ordered list of account transactions.

Journal

Debts that a firm owes to others are called _______.

Liabilities

The current ratio is a(n) ________ ratio.

Liquidity

_______ refers to how fast an asset can be converted into cash.

Liquidity

The internal use of accounting statements by managers in planning and directing the organization's activities is known as _______ accounting.

Managerial

A budget that covers the entire firm and not just individual departments is called a(n) _______ budget.

Master

All of the following are assets of an organization EXCEPT ________.

Money owed to creditors

If an accountant were to take a firm's total revenue and deduct all expenses (including taxes), the result would be ______.

Net income (or loss)

Cash from _______ activities is calculated by combining the changed in the revenue accounts, expense accounts, current asset accounts, and current liability accounts.

Operating

The "Retaining Earnings" account is one of the _______ accounts.

Owners' equity

The process of transferring information from a journal to a ledger is known as _______.

Posting

Which of the following would most likely include a title of controller or internal auditor?

Private accountant

Gross income and gross earnings are two equivalent terms for gross _______.

Profit

________ ratios measure how much operating income an organization is able to generate relative to assets, owners' equity, and sales.

Profitability

A ________ analysis calculates an organization's financial health.

Ratio

Sales divided by accounts receivable is the definition of _______.

Receivables turnover

Which report shows how much income the firm produces for every dollar it invests in assets?

Return on assets

_______ is/are the total amount of money received (or promised) from the sale of goods or services, as well as from other business activities such as the rental of property and investments.

Revenue

Investors may use per _______ data to compare the performance of one company to another on an equal, or per share, basis.

Share

The ______ explains how the company's cash changed from the beginning of the accounting period to the end.

Statement of cash flows

In any accounting system, financial data typically pass through a four-step procedure sometimes called ________.

The accounting cycle

General and administrative expenses

The costs of owning and maintaining the general office

Interest expenses

The direct cost of borrowing money

Accounting scandals of the last decade or a bit more, have prompted _______ to take a greater role in trying to control such problems.

The federal government

Who receives the dividends per share?

The stockholder

Operating income divided by interest expense is the definition of ______.

Times interest earned ratio

Sales divided by total assets is the definition of _______.

Total asset turnover

What is the term given to a summary of all financial data to make certain the figures are correct and balanced?

Trial balance

Each share of stock in a corporation represents a claim on the organization.

True

Banks and lenders use of financial reports

Use financial statements to determine a company's ability to meet current and future debt obligations if a loan or credit is granted

Potential investors use of financial reports

Use financial statements to determine whether returns from a given firm are likely to compare favorably with other similar companies

Labor unions use of financial reports

Use financial statements to establish reasonable expectations for salary and other benefit requests