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Exam 16: Understanding Accounting and Financial Information

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Question 51

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

A) True
B) False

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Question 52

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The purpose of a trial balance is to:

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 (SEC) .
D) show whether the figures in the account ledgers are correct and balanced.

E) None of the above
F) A) and B)

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Question 53

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

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

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

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

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:

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

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

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

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

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

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

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:

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.

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

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:

Return on sales divides ____ by _.

A bookkeeper's first task is to:

The fundamental accounting equation states that assets equal _______.