MGMT 1 Lesson 8

True or False: Accounting, as the language of business, is solely concerned with providing information useful to managers of profit-seeking firms.

False

True or False: Financial accounting and managerial accounting are similar in that they both provide information intended primarily for people inside the organization.

False

True or False: Jamal is an accountant employed full-time by The Barkley Company. Jamal is an example of a public accountant.

False

True or False: The income statement reports the difference between a firm's assets and its liabilities as of a certain date.

False

True or False: A savings and loan association (S&L) is a financial institution that accepts both savings and checking deposits and provides home mortgage loans.

True

True or False: Accounting provides financial information that can be useful to owners, creditors, suppliers, employees, and competitors of an organization.

True

True or False: All federally chartered banks are members of the Federal Reserve.

True

True or False: An analysis of the statement of cash flows can help a firm prevent cash shortages.

True

True or False: An increase in the discount rate produces a decrease in money supply.

True

True or False: Both the M-1 and M-2 definitions of money include coins and paper money.

True

True or False: Commercial banks, savings and loan associations, and credit unions all represent components of the American banking system.

True

True or False: Large pension funds represent a powerful force in U.S. financial markets.

True

True or False: Revenue on the income statement represents the dollar amount of what is received for goods sold, services rendered and/or from other revenue sources.

True

True or False: The Barkley Company's balance sheet shows: what the business owns, minus what the business owes, which equals the book value (or net worth) of the business.

True

True or False: The FDIC exists to maintain the public's confidence in the banking system.

True

True or False: The IMF's goal is to maintain a global monetary system.

True

True or False: The M-1 definition of the money supply includes travelers' checks.

True

True or False: The Sarbanes-Oxley Act prohibits accounting firms from providing certain nonauditing work (such as consulting services) to companies they audit.

True

True or False: The U.S. government is a user of a firm's accounting information.

True

For the past several years, Bill Reynolds has retained accountant Chelsea Jones for help in preparing his personal income tax forms. Bill's boss recommended Chelsea because she had done a good job setting up the company's new accounting system. Bill is very satisfied with Chelsea's work and feels that the fees she charges are quite reasonable. Chelsea would be classified as a(n): a. public accountant. b. independent auditor. c. accounting broker. d. private accountant.

a. public accountant.

When the Fed increases the reserve requirement, banks: a. must pay more to borrow from the Fed. b. have fewer funds available for lending. c. will find their balance sheets temporarily out of balance. d. must increase the dollar volume of loans they make to customers.

b. have fewer funds available for lending.

Debts owed by a business are called __________. a. revenues b. liabilities c. equities d. assets

b. liabilities

When the Fed increases the discount rate, banks: a. must purchase more government securities. b. must pay a higher rate when they borrow from the Fed. c. will lower the rate they charge to borrowers. d. must hold a greater amount of funds in reserve against deposits.

b. must pay a higher rate when they borrow from the Fed.

Designed to create more confidence in banking institutions, the FDIC was established: a. in 1917, as the nation entered World War I. b. in 1908, as the result of the banking panic in 1907. c. during the Great Depression of the 1930s. d. soon after the Civil War.

c. during the Great Depression of the 1930s.

Which of the following responses is the best and most comprehensive? "A company's accounting information is useful to ____________." a. marketing research firms for pricing insights b. primarily the IRS and other government agencies that regulate the firm c. managers, owners, creditors, employees, and the government d. managers within the firm, exclusively

c. managers, owners, creditors, employees, and the government

The technical name for a savings account is a: a. retained income account. b. deferred account. c. time deposit. d. demand deposit.

c. time deposit.

When reviewing the balance sheet for Preferred Pet Care, Inc., a mobile small animal care business, Julian noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners' equity) for this business = ___________. a. $3.5 million b. $4.8 million c. $0.2 million d. $2.2 million

d. $2.2 million

As a response to the bank failures of the _______, a system of federal deposit insurance was established to strengthen the banking system. a. banking crisis of the early 1980s b. Civil War c. wildcat banking crisis of the 1880s d. Great Depression

d. Great Depression

________ involve(s) the Fed buying and selling U.S. government securities to increase or decrease the money supply. a. Reserve requirements b. Discounting c. Deficit funding d. Open-market operations

d. Open-market operations

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals: a. net income. b. gross margin. c. cash reserves. d. owners' equity.

d. owners' equity.