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Chapter 01 Accounting: Information for Decision Making Answer Key
True / False Questions
1.
Managerial accounting information is designed primarily to assist investors and creditors
in deciding how to allocate scarce resources.
2.
All internal control systems need to be monitored.
3.
Management accounting information is oriented toward the future while financial
accounting information is historical in nature.
4.
Return on investment is the same as return of investment.
5.
The IRS tax return is one of the primary financial statements.
6.
External users of accounting information have a financial interest in an entity but are not
involved with the day-to-day operations of the enterprise.
7.
The tailoring of an accounting report to meet the needs of a specific decision maker is
more characteristic of financial accounting reports than of management accounting
reports.
8.
The annual financial statements of large corporations such as Microsoft or PepsiCo need
not be audited by independent certified public accountants, since these firms maintain
large accounting departments as part of their organizations.
9.
The statement of financial position and the income statement are one and the same.
10.
Investors are individuals and other enterprises that have provided equity to the reporting
enterprise.
11.
A statement of cash flows depicts the way profits have changed during a designated
period.
12.
Management accounting refers to the preparation and use of accounting information
designed to meet the needs of decision makers outside the business organization.
13.
The content of management accounting reports needs to be presented in conformity with
generally accepted accounting principles.
14.
One purpose of generally accepted accounting principles is to make accounting
information prepared by different companies more comparable.
15.
An accounting practice can become a "generally accepted accounting principle" through
widespread use, even if the practice is not mentioned in the official pronouncements of
the accounting standard-setting organizations.
16.
The Public Company Accounting Oversight Board is responsible for creating and promoting
International Financial Reporting Standards.
17.
Today, the most authoritative source of generally accepted accounting principles is the
American Accounting Association.
18.
The American Institute of Certified Public Accountants has the legal authority over publicly
held corporations to enforce compliance with generally accepted accounting principles.
19.
The Securities and Exchange Commission is instrumental in the development of financial
accounting standards.
20.
Financial accounting standards issued by the FASB are considered generally accepted
accounting principles.
21.
Generally accepted accounting principles were established by the American Accounting
Association in 1934 and are updated annually by Congress.
22.
The CPA examination is administered by the General Accounting Office of the U. S.
Government.
23.
The Sarbanes-Oxley Act places responsibility on CEOs and CFOs of companies to certify
the fairness of company's financial statements. The Act also created the Public Company
Accounting Oversight Board which oversees the public accounting profession.
24.
The Code of Ethics of the AICPA calls for a commitment to ethical behavior but not at the
sacrifice of personal advantage.
25.
The Code of Ethics of the AICPA calls for a member in public practice to be independent in
fact and appearance when providing auditing services.
26.
Public accounting is the segment of the profession where professionals offer audit, tax,
and consulting services to clients.
27.
Career opportunities in accounting exist in public accounting, management accounting,
governmental accounting and accounting education.
Multiple Choice Questions
28.
Financial accounting information is:
29.
Which of the following does
not
describe accounting?
30.
The field of accounting may best be described as:
31.
The basic purpose of bookkeeping is to:
32.
Which of the following is
not
characteristic of financial accounting?
33.
The accounting systems of most business organizations:
34.
The New York Stock Exchange and the NASDAQ both require all listed companies to
35.
Which of the following is
not
a basic function of an accounting system?
36.
Information is cost effective when:
37.
Which of the following events is not a transaction that would be recorded in a company's
accounting records?
38.
A strong internal control structure:
39.
The best definition of an accounting system is:
40.
The objectives of an accounting system include all of the following,
except
:
41.
Suppose a number of your friends have organized a company to develop and sell a new
software product. They have asked you to loan them $8,000 to help get the company
started, and have promised to repay your $8,000 plus 10% interest in one year. Of the
following, which amount may be described as the return on your investment?
42.
Which of the following is generally
not
considered one of the general purpose financial
statements issued by a corporation?
43.
Which of the following is considered a return "on" investment?
44.
The financial statements of a business entity:
