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Exam 17: Understanding Accounting and Financial Information

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Question 141

True/False

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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.

A) True
B) False

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Question 142

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In the course of their jobs, bookkeepers:

A) Interpret accounting data.
B) Approve decisions about major expenditures.
C) Record business transactions.
D) Prepare financial statements.

E) A) and D)
F) A) and C)

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Question 143

Multiple Choice

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To effectively run a business, it is necessary to:

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.

Computerized accounting programs have eliminated the need to prepare a trial balance.

The statement of cash flows calculates cash flows from operations, investing activities, and financing activities.

Rent, salaries, insurance and depreciation are examples of the cost of goods sold.

Marshall McBride inherited $10,000 from his Great Aunt Martha. He invested $5,000 in a new, risky start-up venture, 10th Generation, Inc., and the other $5,000 in Major Chemicals, Inc, a well-known chemical company that's been around for years. Today, his financial planner called to inform him that the Return on Equity on 10th Generation = 6.28%; and, Return on Equity on Major Chemicals = 10.50%. Which of the following facts is important information for Marshall McBride?

Many business decisions are made in hopes of improving a firm's "bottom line." Which of the following financial statements will reveal a firm's "bottom line"?

Sales receipts, purchase orders, and payroll records are all examples of accounting transactions that would be recorded by a(n) :

Mini-Case Minnie A. Wright-Hoff works as an accountant for Double Entry Doors, Inc. Her company sells and installs oversized garage doors needed by large vehicles. Most of Minnie's work involves helping department heads and other decision-makers by measuring and reporting costs for their departments, and by identifying areas where departments are exceeding their budgets. However, as one of only three accountants employed by Double Entry Doors, Minnie is something of a "jill-of-all-trades" in terms of her accounting assignments. For example, she recently spent several hours summarizing all of the financial data in account ledgers to see if the information was correct and balanced. Her efforts revealed no problems, so she is now ready to start working on the firm's financial statements. Minnie is interested in this part of the accounting cycle because she likes to be one of the first to know the "bottom line" her company will report. She knows that she and the other accountants who work on these statements can influence the results by the choices they make about the way they report certain items. -The fact that Minnie spends most of her time measuring costs and checking to see if departments are staying within their budgets suggests that she is often involved in:

The Barkley Company bought supplies in early January that it must pay for by the end of the month. These purchases are posted to accounts payable and listed as assets on the firm's balance sheet.

If a firm can reduce its cost of goods sold and continue to sell its product for the same price, we would expect the firm to enjoy an increase in its:

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years. Scott would record this as a on its balance sheet.

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.

Information contained in a firm's annual report largely represents work done by managerial accountants.

The main reason an accountant would conduct a trial balance is to:

Careful consideration of the use of computers in accounting indicates that computers .

Financial ratios that reflect the degree to which a firm relies on borrowed funds are called ratios.

The cost of goods sold reflects the selling price of the merchandise sold over a period of time.