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  • Chapter 01 - Introduction to Accounting

    1-1

    Chapter 01 Introduction to Accounting

    True / False Questions

    1. Accounting is an information and measurement system that identifies, records, and communicates financial information to users. True False

    2. Bookkeeping is the same as accounting. True False

    3. Bookkeeping is the recording of transactions and events and is only part of accounting. True False

    4. Accounting is one way important information about businesses is reported to decision makers. True False

    5. Internal reports are subject to the same rules as external reports as consistency is important and makes information more useful to the user. True False

    6. Accounting software packages reduce the time, effort and cost of recordkeeping. True False

    7. Internal auditors assess an employer's procedures and controls over recordkeeping activities and physical control of a firm's assets. True False

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    8. Internal controls are procedures designed to protect company property, ensure reliable reports, promote efficiency and ensure employees follow company policies. True False

    9. Accounting information systems collect, process and report information to decision makers. True False

    10. Managerial accounting is an area of accounting that provides internal reports to assist in the decision-making needs of internal users. True False

    11. The primary objective of financial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities. True False

    12. Opportunities in accounting include auditing, management consulting, and tax planning. True False

    13. The Financial Accounting Standards Board is the private group that sets both broad and specific accounting principles. True False

    14. Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements. True False

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    15. Generally accepted accounting principles were established to improve conformity in financial reporting by making information relevant, reliable and comparable. True False

    16. US accounting practices are viewed as rule-based as financial statements are prepared using technical, specific and detailed rules. True False

    17. External auditors examine financial statements to determine if they are prepared according to generally accepted accounting principles. True False

    18. External users include lenders, shareholders, customers, and regulators. True False

    19. Internal users include lenders, shareholders, brokers and managers. True False

    20. Identifying the proper ethical path is easy. True False

    21. Ethics are not important to decision making in accounting. True False

    22. Guidelines for ethical decision making requires recognition of an ethical concern and consideration of good and bad consequences. True False

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    23. Good ethics are good business. True False

    24. State ethics codes require CPAs who audit financial statements to disclose areas where those statements fail to comply with GAAP. True False

    25. Public accounting provides the majority of the career opportunities. True False

    26. The majority of accounting career opportunities are in the private sector. True False

    27. Understanding generally accepted accounting principles is not necessary to use and interpret financial statements. True False

    28. The Sarbanes-Oxley Act requires issuers of securities to disclose the adoption of an ethics code. True False

    29. The Securities and Exchange Commission (SEC) is an arm of the federal government that establishes reporting requirements for companies that issue stock to the public. True False

    30. The Financial Accounting Board is the group that establishes reporting requirements for companies that issue stock to the public. True False

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    31. A limited liability company is treated like a corporation for liability and tax purposes. True False

    32. Separate legal status means that a corporation can conduct business with the rights, duties and responsibilities as a person. True False

    33. Separate legal status means that owners, called shareholders are not personally liable for corporate acts and debts. True False

    34. Three forms of business include service providers, wholesalers and retailers. True False

    Multiple Choice Questions

    35. The primary objective of financial accounting is: A. To serve the decision-making needs of internal users. B. To provide financial statements to help external users analyze an organization's activities. C. To monitor and control company activities. D. To provide information on both the costs and benefits of looking after products and services. E. To know what, when, and how much to produce.

    36. External users of accounting information include: A. Shareholders. B. Customers. C. Creditors. D. Government regulators. E. All of these.

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    37. Career opportunities in accounting include: A. Auditing. B. Management consulting. C. Tax accounting. D. Cost accounting. E. All of these.

    38. Internal users of accounting information include: A. Shareholders. B. Managers. C. Lenders. D. Suppliers. E. Customers.

    39. Accounting is an information and measurement system that: A. Identifies business activities. B. Records business activities. C. Communicates business activities. D. Helps people make better decisions. E. All of these.

    40. Accounting software: A. Has replaced the need for accountants. B. Has not changed the work that accountants do. C. Has improved clerical accuracy. D. Has replaced the need for decision makers. E. Is only available to large corporations.

    41. The area of accounting aimed at serving the decision-making needs of internal users is: A. Financial accounting. B. Managerial accounting. C. External auditing. D. SEC reporting. E. Bookkeeping.

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    42. The financial statements prepared for external users is often referred to as A. The books. B. Integrated financial statements. C. Statements of financial position. D. General purpose financial statements. E. Proforma financial statements.

    43. The organization responsible for overseeing the work of external auditors is the: A. FASB. B. SEC. C. PCAOB. D. GAAP. E. AICPA.

    44. Career opportunities in accounting include: A. Budgeting. B. Auditing. C. Cost accounting. D. Internal Auditing. E. All of these.

    45. Accounting certifications include the: A. Certified Public Accountant. B. Certified Management Accountant. C. Certified Internal Auditor. D. Certified Bookkeeper. E. All of these.

    46. A Certified Public Accountant. A. Must meet education and experience requirements. B. Must pass an examination. C. Must exhibit ethical character. D. May also be a Certified Management Accountant. E. All of these.

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    47. Ethical behavior: A. Requires that auditors' pay not depend on the figures in the client's reports. B. Encourages auditors to invest in businesses they audit. C. Does not affect external users. D. Is rarely an issue in business. E. All of these.

    48. The rules adopted by the accounting profession as guides in preparing financial statements are: A. Comprised of both general and specific principles. B. Known as generally accepted accounting principles. C. Abbreviated as GAAP. D. Intended to make information in financial statements relevant, reliable, and comparable. E. All of these.

    49. The board of directors report to A. Shareholders. B. Lenders. C. Management. D. SEC. E. All of these.

    50. The committee that attempts to create more harmony among the accounting practices of different countries by identifying preferred practices and encouraging their worldwide acceptance is the: A. AICPA. B. FASB. C. CAP. D. SEC. E. IASB.

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    51. The private board that currently has the authority to establish generally accepted accounting principles is the: A. APB. B. FASB. C. AAA. D. AICPA. E. SEC.

    52. Rules adopted by the accounting profession to make information relevant, reliable and comparable: A. Are comprised of both general and specific principles. B. Are known as generally accepted accounting principles. C. Are abbreviated as GAAP. D. Are established by FASB and SEC. E. All of these.

    53. In order to be useful, accounting information must be A. Reliable. B. Relevant. C. Conform to GAAP. D. Both a and b. E. All of these.

    54. Generally accepted accounting principles: A. Are practices adopted by accountants to make accounting easier. B. Are only necessary when convenient. C. Can be overruled if approved by the SEC. D. Strive to make information relevant, reliable and comparable. E. None of these.

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    55. The International Accounting Standards Board (IASB) A. Hopes to create harmony among accounting practices of different countries. B. Is the government group that establishes reporting requirements for companies that issue stock to the public. C. Has the authority to impose its standards on companies. D. Is the only source of generally accepted a

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