Question 1

A loan officer at the Saltwater State Bank is considering a loan application from Lanwell Mills.He is concerned about the ability of the company to make repayments if it grants the loan.The loan officer is likely to be very interested in Lanwell's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 2

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Accepted Answer

A) True 
 B)False

Question 3

Computers today can actually record and analyze data,in addition to printing financial reports.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is  NOT an area of importance in accounting?

Accepted Answer

A)  recording information about financial transactions.
B)  summarizing information about financial transactions.
C)  setting prices for goods and services sold by the organization.
D)  analyzing financial information.

Question 5

A bookkeeper's first task is to:

Accepted Answer

A)  interpret and report data to the firm's management.
B)  classify and summarize the firm's financial data.
C)  prepare the firm's financial statements.
D)  divide all of the firm's transactions into meaningful categories.

Question 6

The first step in the accounting cycle is posting information regarding business transactions into the ledgers.

Accepted Answer

A) True 
 B)False

Question 7

The books where accounting data are first entered are called ledgers.

Accepted Answer

A) True 
 B)False

Question 8

Hap owns and operates a small business with only four full time employees and less than $500 thousand in annual sales.He currently uses a manual accounting system and relies on a part-time bookkeeper to keep his records in order.In evaluating the possible adoption of a computerized accounting system,Hap will probably discover that:

Accepted Answer

A)  a computerized system would be affordable,but that he would have little need for it unless his company grew and became significantly larger.
B)  he would be better off hiring a full time accountant.
C)  he could benefit greatly from adopting such a system,but should also consult with an accountant for advice.
D)  the expense of setting up a computerized accounting system would be beyond his financial ability at this time.

Question 9

The accounting profession is divided into five key working areas,two of which are:

Accepted Answer

A)  forecasting and logistical accounting.
B)  auditing and managerial accounting.
C)  inventory control and budgeting.
D)  income accounting and expenditure accounting.

Question 10

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better decisions.

Accepted Answer

A) True 
 B)False

Question 11

Keith will be graduating from Acadia University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Accepted Answer

A)  liabilities.
B)  intangibles.
C)  assets.
D)  owners' equity.

Question 12

Good decisions are based on good information.That's why an organization needs accounting-to provide good information.

Accepted Answer

A) True 
 B)False

Question 13

The income statement computes net income by subtracting liabilities from assets.

Accepted Answer

A) True 
 B)False

Question 14

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

Accepted Answer

A)  cash reserves.
B)  gross margin.
C)  owners' equity.
D)  net income.

Question 15

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Accepted Answer

A) True 
 B)False

Question 16

The purpose of a trial balance is to:

Accepted Answer

A)  prepare a mock up of a real balance sheet.
B)  review the income statement accounts.
C)  meet a reporting requirement of the Securities Exchange Commission (SE
C)  .
D)  show whether the figures in the account ledgers are correct and balanced.

Question 17

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Return on sales divides ____ by _.

Accepted Answer

A)  net income after tax;total owners' equity
B)  net income;net sales
C)  income;number of shares outstanding
D)  net income;taxes

Question 19

The fundamental accounting equation states that assets equal _______.

Accepted Answer

A)  liabilities plus owners' equity
B)  liabilities plus receivables
C)  liabilities minus owners' equity
D)  payables plus cash equivalents

Question 20

April works in the accounting department at Henson's Tire & Auto.She is concerned that the company has been placing too many orders for office supplies and wants to look at all of the transactions involving the purchase of office supplies for the past several months.April could find such information by looking at the supplies account in the:

Accepted Answer

A)  cash flow statement.
B)  journal.
C)  account debit book.
D)  ledger.

Exam 16: Understanding Accounting and Financial Information

Computers today can actually record and analyze data,in addition to printing financial reports.

Correct Answer
verified

A loan officer at the Saltwater State Bank is considering a loan application from Lanwell Mills.He is concerned about the ability of the company to make repayments if it grants the loan.The loan officer is likely to be very interested in Lanwell's statement of cash flows.

Correct Answer
verified

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

Correct Answer
verified

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Correct Answer
verified

Good decisions are based on good information.That's why an organization needs accounting-to provide good information.

Correct Answer
verified

The fundamental accounting equation states that assets equal _______.

Correct Answer
verified

The purpose of a trial balance is to:

Correct Answer
verified

The income statement computes net income by subtracting liabilities from assets.

Correct Answer
verified

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

Correct Answer
verified

Which of the following is NOT an area of importance in accounting?

Correct Answer
verified

Correct Answer
verified

Return on sales divides ____ by _.

Correct Answer
verified

Keith will be graduating from Acadia University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Correct Answer
verified

The accounting profession is divided into five key working areas,two of which are:

Correct Answer
verified

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better decisions.

Correct Answer
verified

The books where accounting data are first entered are called ledgers.

Correct Answer
verified

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Correct Answer
verified

Correct Answer
verified

A bookkeeper's first task is to:

Correct Answer
verified

The first step in the accounting cycle is posting information regarding business transactions into the ledgers.

Correct Answer
verified

Exam 16: Understanding Accounting and Financial Information

Computers today can actually record and analyze data,in addition to printing financial reports.

Correct AnswerverifiedShow Answer

A loan officer at the Saltwater State Bank is considering a loan application from Lanwell Mills.He is concerned about the ability of the company to make repayments if it grants the loan.The loan officer is likely to be very interested in Lanwell's statement of cash flows.

Correct AnswerverifiedShow Answer

An independent audit is an evaluation and unbiased opinion about the accuracy of a company's financial statements.

Correct AnswerverifiedShow Answer

Activity ratios measure the effectiveness of the firm's management in using its various resources to achieve profits.

Correct AnswerverifiedShow Answer

Good decisions are based on good information.That's why an organization needs accounting-to provide good information.

Correct AnswerverifiedShow Answer

The fundamental accounting equation states that assets equal _______.

Correct AnswerverifiedShow Answer

The purpose of a trial balance is to:

Correct AnswerverifiedShow Answer

The income statement computes net income by subtracting liabilities from assets.

Correct AnswerverifiedShow Answer

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

Correct AnswerverifiedShow Answer

Which of the following is NOT an area of importance in accounting?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Return on sales divides ____ by _.

Correct AnswerverifiedShow Answer

Keith will be graduating from Acadia University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Correct AnswerverifiedShow Answer

The accounting profession is divided into five key working areas,two of which are:

Correct AnswerverifiedShow Answer

The sole purpose of accounting is to help managers evaluate the financial condition of the firm so that they may make better decisions.

Correct AnswerverifiedShow Answer

The books where accounting data are first entered are called ledgers.

Correct AnswerverifiedShow Answer

The fundamental accounting equation is as follows: Assets = Liabilities + Owners' equity.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bookkeeper's first task is to:

Correct AnswerverifiedShow Answer

The first step in the accounting cycle is posting information regarding business transactions into the ledgers.

Correct AnswerverifiedShow Answer

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