52. The Sarbanes-Oxley Act strengthens the protection for whistleblowers who report
wrongful actions of company officers.
53. The Sarbanes-Oxley Act prohibits accounting firms from providing certain nonauditing
work (such as consulting services) to companies they audit.
54. According to the
Adapting to Change
box, the SEC is determined to crack down on and
punish those accused of fraud. However, so many auditors and CPAs are trained in how to search
for fraud that there are too many cases to prosecute.
55. As mentioned in the
Adapting to Change
box, accountants that search for fraudulent
activities are called forensic accountants.
56. Jamal is an accountant employed full-time by The Barkley Company. Jamal is an example
of a public accountant.
57. Because each business is unique, the accounting profession recognizes that the
accounting principles followed by one company may need to be completely different from the
accounting principles followed by another firm.
58. Derek has a bachelor’s degree in accounting and additional training in tax law. He is
responsible for preparing tax returns and developing tax strategies for his employer, and has
done so for the past seven years. Derek is a certified government accountant.
59. Citywide Insurance Corporation’s internal accountants can prepare an audit for the
company.
60. Martha is a member of a conservative political group that wants to identify and publicize
examples of wasteful government spending. The type of accounting information Martha and her
group will follow most closely is provided by certified public accountants.
61. Bookkeeping is part of the accounting cycle, but accounting goes far beyond the activities
involved in bookkeeping.
62. A major part of a bookkeeper’s job is to interpret financial data and suggest strategies for
improving the firm.
63. After recording a business’s transactions, bookkeepers usually classify the recorded
transactions into groups with common characteristics.
64. A bookkeeper’s first task is to record the firm’s transactions in a journal.
65. The books where accounting data are first entered are called ledgers.
66. Double-entry bookkeeping requires that every transaction be recorded in two places.
67. Double-entry bookkeeping can help identify a recording error made by a bookkeeper.
68. A journal is where the initial record of a day’s transactions is entered.
69. The accounting book that provides all the information about a single account in one place
is called the ledger.
70. At present, accounting software packages have proven to be too complex and expensive to
be useful for owners of small businesses.
71. The accounting cycle is a six-step procedure that results in the preparation and analysis of
major financial statements.
72. Posting is a step in the accounting cycle that involves transferring information from the
journal into the appropriate accounts in a ledger.
73. There are two major financial statements prepared at the completion of the accounting
cycle: the journal and the ledger.
74. The accounting cycle usually involves the work of both the bookkeeper and the
accountant.
75. The purpose of a trial balance is to prepare a practice balance sheet.
76. One of the statements prepared in the accounting cycle is the statement of cash flows.
77. Many businesses now use computers and accounting software to simplify the mechanical
aspects involved in accounting.
78. Accounting software for small businesses has become so sophisticated that most small
business owners will never need to consult with an actual accountant or understand accounting
information themselves.
79. Accounting software has proven to be especially helpful for small-business owners.
80. One advantage of the double-entry method of bookkeeping is that it helps to identify
mistakes made in recording financial transactions.
81. Computerized accounting programs have eliminated the need to prepare a trial balance.
82. In addition to the tasks of recording and classifying accounting information, the best
accounting software programs currently available for small businesses have the ability to make
financial decisions, thus eliminating the need for owners of small businesses to consult with
accountants or understand accounting terminology.
83. The steps in the accounting cycle do not need to be followed in the order stated. Monthly
financial statements can be prepared with a good amount of accuracy, prior to posting in the
ledger or preparing the trail balance.
84. Carol has worked as a bookkeeper for a small clothing store for almost three years. Her
old boss recently retired and a new manager took over. The new manager frequently asks her for
information and advice about how to interpret the information she records. Carol’s experience as
a bookkeeper means she is qualified to provide this type of advice.
85. Bark Three Times Pet Store recently hired an accountant to make sense of each day’s
transactions, and keep better financial records for the business. The accountant showed the
owner that the ledger in a computerized accounting system would automatically take entries and
post them to the correct accounts in the ledger, making the bookkeeping tasks much easier.
86. Olivia is a public accountant. She prepares monthly financial statements for her client,
Chick’s Auto Body Shop. Presently, though, she must summarize the data in the accounting
ledgers to determine if the figures are correct and balanced. Olivia will prepare a statement of
cash flows in order to complete this step of the cycle.
87. Mike is the head of the accounting department at Micro Flash. After completing the trial
balance, he will proceed with the preparation of the balance sheet, the income statement and the
statement of cash flows.
88. Juliet has found that her small business needs a better way to maintain accounting
records and analyze business opportunities. Currently, she uses a manual accounting system.
These days, any off-the-shelf accounting package available should do an excellent job of meeting
her firm’s accounting needs.
89. Courtney McRae started the Row-Your-Boat paddle boat and row boat business at a
nearby lake resort. She wanted to combine her accounting degree with her love of the outdoors
and fishing. One of her first business purchases was a computerized accounting system. She
learned in her college classes that a good software system will eliminate accounting cycle steps
and the time it takes for her to interpret the results. As she put it, “It should make the decisions
for me!”
90. The key financial statements are the balance sheet, the income statement, and the
statement of cash flows.
91. The income statement reports the difference between a firm’s assets and its liabilities as
of a certain date.
92. A firm’s balance sheet reports its financial condition on a specific date.
93. The balance sheet reports revenues and selling costs for a period of time.
94. An income statement reports what a company owns and owes on a certain day.
95. Assets are reported on the firm’s balance sheet.
96. Liabilities are reported on the income statement.
97. Assets are economic resources that are owned by a firm.
98. The fundamental accounting equation is as follows: Assets = Liabilities + Owners’ equity.
99. The balance sheet reflects the fact that assets equal the sum of liabilities and owners’
equity.
100. A balance sheet is composed of assets, liabilities, and revenues.
101. The cost of goods sold includes all the costs of buying and keeping merchandise available
for sale.
102. Rent, salaries, insurance and depreciation are examples of the cost of goods sold.