1. Which of the following is not characteristic of financial accounting?
A. Information used in financial statements is prepared in conformity with generally accepted accounting principles.
B. The information is confidential and is intended for use only by company management.
C. The information is used in a wide variety of business decisions.
D. The information is developed primarily by "private accountants" that is, accountants employed by business organizations.
2. It is the function of management accounting to perform the following activities, except:
A. Financial forecasts
B. Cost accounting
C. Internal audits
D. Audited financial statements
3. The basic purpose of an audit is to:
A. Assure financial statements are in conformity with GAAP.
B. Provide as much useful information to decision makers as possible, regardless of cost.
C. Record changes in the financial position of an organization by applying the concepts of double entry accounting.
D. Meet an organization's need for accounting information as efficiently as possible.
4. The accounting systems of most business organizations:
A. Are tailored to meet the organization's needs for accounting information and the resources available for operating the system.
B. Are similar in design to the journals, ledgers, and worksheets illustrated in this text.
C. Utilize data bases, rather than ledger accounts.
D. Are designed by the CPA firm that performs the annual financial audit.
5. Which of the following is not a basic function of an accounting system?
A. To interpret and record the effects of business transactions.
B. To classify the effects of similar transactions in a manner that permits determination of various totals and subtotals useful to management.
C. To ensure that a business organization will be managed profitably.
D. To summarize and communicate information to decision makers.
6. Investors may be described as:
A. Individuals and enterprises that have provided credit to a reporting entity.
B. Individuals and enterprises that own a reporting entity business.
C. Anyone that has an interest in the results of the operations of the reporting entity.
D. Those whose primary economic activity consists of buying and selling stocks and bonds.
7. Investors and creditors are interested in the probability that their original investment or loan will eventually be returned, and that they will receive a reasonable return while their funds are invested or borrowed. These expectations are collectively referred to as:
A. Expected profitability.
B. The objectives of financial reporting.
C. Cash flow prospects.
D. Financial position.
8. Financial statements are designed primarily to:
A. Provide managers with detailed information tailored to the managers' specific information needs.
B. Provide people outside the business organization with information about the company's financial position and operating results.
C. Report to the Internal Revenue Service the company's taxable income.
D. Indicate to investors in a particular company the current market values of their investments.
9. The measures used by an organization to provide reasonable assurance that the organization produces reliable financial reports, complies with applicable laws and regulations, and conducts its operations in an efficient and effective manner are collectively referred to as:
A. Generally accepted accounting principles.
B. Financial accounting standards.
C. Securities and exchange regulations.
D. The internal control structure.
10. The best definition of an accounting system is:
A. Journals, ledgers, and worksheets.
B. Manual or computer-based records used in developing information about an entity for use by managers and also persons outside the organization.
C. The personnel, procedures, devices, and records used by an entity to develop accounting information and communicate this information to decision makers.
D. The concepts, principles, and standards specifying the information which should be included in financial statements, and how that information should be presented.