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Exam 17: Understanding Accounting and Financial Information

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Question 181

True/False

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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.

A) True
B) False

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Question 182

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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) B) and D)
F) B) and C)

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Question 183

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Before starting his landscape business,Andrew took a marketing class at the local Community College.He decided that his time would be better utilized in this class because if he could learn to sell his services well,the revenues and profits would follow.Your assessment of his plan might include which of the following?

A firm's efficient use of its assets in running the business is key to maintaining sufficient cash flow.Ratios that accountants utilize to measure the efficient use of assets are called ____________ ratios.

An analysis of the statement of cash flows can help a firm prevent cash shortages.

If the goal of a business is to pay lower taxes on its income during an inflationary period,it is likely to use the FIFO inventory costing method.

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.

Assets are economic resources that are owned by a firm.

Accounting involves both the recording and the interpreting of financial events.

To effectively run a business,it is necessary to:

Peak Performance Sporting Goods Company has just applied for a bank loan in order to expand the business.Using the most recent Balance Sheet data provided by the company owner,you calculate that the company's current ratio is 2.5.In your presentation to the company boss,you remark:

Which of the following ratios is a liquidity ratio?

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 last major task Minnie completed before getting ready to prepare the firm's financial statements was the preparation of the:

One of the problems with current accounting procedures is that there is no way for firms to systematically write off the costs of property and equipment over time.

The Barkley Company wants to know the value of its owners' equity.It will total its assets and subtract its liabilities.

FIFO is a method of computing net cash flows by subtracting financial inflows from financial outflows.

Explain the differences between managerial and financial accounting,and give examples of the types of problems and issues examined by each of these areas of accounting.

Meg Malloy is running an income statement on her QuickBooks™ computer accounting program.Which of the following accounts will be used to calculate gross profit?

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

The basic earnings per share ratio does not take stock options,warrants,and preferred stock into account.