1. Accounting is an easy subject for people to understand because almost everyone is
exposed to basic accounting concepts in their everyday life.
2. Although managers who work for large firms must know something about accounting,
people who run small businesses only need to know the basics of bookkeeping.
3. It is impossible to run a company effectively without the ability to read and understand
basic accounting reports and financial statements.
4. With increased computer technology, the ability to read and understand financial
statements is no longer an important skill for managers.
5. Accounting provides information about the financial condition and operating performance
of a firm.
6. The sole purpose of accounting is to help managers evaluate the financial condition of the
firm so that they may make better pricing decisions.
7. Inputs to the accounting system include sales documents.
8. Purchasing insurance, paying employees, and using supplies are examples of financial
transactions.
9. Accounting provides financial information that can be useful to owners, creditors,
suppliers, employees, and competitors of an organization.
10. Accountants do the work involved in recording financial events and transactions, but the
actual classifying and interpreting of this data is left to financial managers.
11. Accounting involves both the recording and the interpreting of financial events.
12. In an effort to maintain a competitive advantage, firms do not share accounting
information with people outside of the firm.
13. The U.S. government is a user of a firm’s accounting information.
14. A business manager who keeps his/her customers satisfied can be successful without
having a great deal of knowledge about accounting practices.
15. Good decisions are based on good information. Organizations need accounting—to
provide good financial information.
16. A firm’s financial statements represent a health report regarding the condition of the
firm.
17. Referring to an accounting system, inputs refers to events and transactions that occur
within the business, while outputs refers to the journal entries and ledger categorization that
occurs after the events and transactions are recorded.
18. Government organizations such as the IRS and other government regulatory agencies are
interested in a firm’s accounting information in order to help the firm strategize about ways to cut
costs in order to minimize net income before taxes.
19. Jeremy operates his own small business, but he doesn’t want to be bothered with
accounting information. He tells his friends, “All I need accounting for is to prepare my income
tax return for my business. I’ll hire someone to do that for me.” Jeremy’s attitude would be
disastrous if he managed a large firm, but is a reasonable view for a small business owner.
20. There are five key working areas in accounting: financial accounting, managerial
accounting, auditing, tax accounting, and government and not-for-profit accounting.
21. Accounting information is not relevant for nonprofit organizations.
22. Churches, schools, and charitable organizations all hire accountants.
23. The accounting profession is divided into two main fields: bookkeeping and auditing.
24. Budget preparation is one aspect of managerial accounting.
25. The work of a certified management accountant is intended to enable people outside of
the organization to make investment decisions.
26. Activities of managerial accountants include measuring and reporting the costs of
production, marketing and other functions within the organization.
27. Financial accounting and managerial accounting are similar in that they both provide
information intended primarily for people inside the organization.
28. Financial accounting involves activities such as preparing budgets and measuring
production costs.
29. Financial accounting is used to provide information and analysis managers within the
organization can use to assist them in decision making.
30. Financial accountants prepare reports for owners, creditors, suppliers, and others outside
of the organization.
31. A firm’s annual report is a yearly statement of the financial condition, progress, and
expectations of the organization during one year.
32. An individual who provides accounting services to individuals and businesses on a fee
basis is referred to as a private accountant.
33. All firms with more than four employees should have a full-time accountant.
34. The job of reviewing and evaluating the records used to prepare a company’s financial
statements is referred to as auditing.
35. Independent audits are prepared by accountants within the organization to ensure that
proper accounting procedures are followed.
36. An independent audit is an evaluation and unbiased opinion about the accuracy of a
company’s financial statements.
37. A tax accountant is responsible for preparing tax returns and developing tax strategies.
38. An accountant who has a bachelor’s degree, two years of experience in internal auditing
and who has passed an exam by the Institute of Internal Auditors can become recognized as a
certified internal auditor.
39. The Internal Revenue Service is responsible for establishing accounting standards used by
accountants working in government accounting.
40. Citizens and special interest groups often have interest in the information generated by
government accounting.
41. GAAP refers to a set of standards concerning accounting principles that were established
by the Financial Accounting Standards Board.
42. Information contained in a firm’s annual report largely represents work done by
managerial accountants.
43. A series of high-profile scandals in the early 2000s put the accounting profession under
intense scrutiny.
44. Accounting is not important for nonprofit organizations since financial data is not critical
to their success.
45. Accounting, as the language of business, is solely concerned with providing information
useful to managers of profit-seeking firms.
46. As a certified public accountant, you would be working in the area of managerial
accounting.
47. Managers who are concerned about keeping costs under control should be very
interested in the information and advice provided by their company’s managerial accountants.
48. Recent accounting scandals raised serious questions about the legitimacy of an
accounting firm performing both auditing and consulting work for the same company.
49. As a certified public accountant (CPA), Kay might become involved in helping clients
select appropriate accounting computer software for their firm.
50. In large companies, certified internal auditors are usually responsible for preparing tax
returns and developing tax strategies for businesses.
51. As the burden of taxes grows, the role of the auditor becomes increasingly important to
the organization.