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Exam 17: Understanding Accounting and Financial Information

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Question 61

Multiple Choice

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A balance sheet lists assets in order of their _______________.

A) dollar value, from smallest to largest
B) date of acquisition, with the most recently acquired assets listed first
C) liquidity, with the most liquid assets listed first
D) income generating ability

E) A) and B)
F) All of the above

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Question 62

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Independent audits are prepared by accountants within the organization to ensure that proper accounting procedures are followed.

A) True
B) False

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Question 63

Multiple Choice

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Kelley's Kloset, LLC, has applied for a business loan. Her prospective banker has requested information concerning the financial condition of her business. Which accounting discipline is responsible for providing accounting information to outside stakeholders?

Financial accounting is used to provide information and analysis managers within the organization can use to assist them in decision making.

FIFO and LIFO are two common:

Which of the following is an example of a financial transaction?

An individual who provides accounting services to individuals and businesses on a fee basis is referred to as a private accountant.

Gross profit represents profit after the deduction of cost of goods sold, and before the deduction of all other selling expenses, general expenses, and tax expense.

The Sarbanes-Oxley Act prohibits accounting firms from providing certain nonauditing work (such as consulting services) to companies they audit.

An important difference between accounting and other business functions, such as marketing and management, is that:

The cash a firm raised from issuing new debt or equity capital would be reported on a statement of cash flows.

Cash flow statements identify three sources of cash receipts and disbursements: assets, liabilities and owners' equity.

FIFO and LIFO are two common methods used to compute the depreciation of tangible assets.

The current ratio is a type of ________ ratio.

The acid-test ratio emphasizes the ability to convert inventory quickly into cash.

It is impossible to run a company effectively without the ability to read and understand basic accounting reports and financial statements.

The _______ ratio helps determine the ability of a firm to repay its short-term debts even if it has difficulty selling its inventory.

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.

Cash revenues from the sale of new cars at Pete's Auto Emporium would be listed as a cash inflow from operations on Pete's statement of cash flows.

A journal is where the initial record of a day's transactions is entered.