What is the definition of vertical analysis of financial statements?
Restricting attention to companies only in certain strategic industries
Displaying each line item as a percentage of another for comparison to other companies in the industry
Looking across time at a common-size financial state...
D196 - Unit 2 || with Error-free Solutions.
What is the definition of vertical analysis of financial statements?
Restricting attention to companies only in certain strategic industries
Displaying each line item as a percentage of another for comparison to other companies in the
industry
Looking across time at a common-size financial statement and noting how relationships are
changing
Expressing each amount as a percentage of net income for the year correct answers Displaying
each line item as a percentage of another for comparison to other companies in the industry
Accounting plays a vital role in the decision-making process. Which action is the first step in the
decision-making process?
Identify the issue.
Identify the alternatives.
Gather information.
Guarantee a good outcome. correct answers Identify the issue.
The money that a company needs to buy its land, pay its employees, and buy its supplies is called
capital. What are the potential sources of capital for a business?
Gross business earnings, employees, and taxes
Investors, creditors, and retained business earnings
Employees, investors, and retained business earnings
Taxes, investors, and retained business earnings correct answers Investors, creditors, and
retained business earnings
True or False: Accountants measure and communicate the results of business activities. correct
answers True
Three basic functions of an accounting system? correct answers 1. Analysis - looking at business
events to determine if information should be captured by the accounting system = analyze
transactions
2. Bookkeeping - day-to-day keeping track of transactions = handle routine bookkeeping tasks
3. Evaluation - obtaining and using financial information to determine the health and
performance of a business = structure information so it can be used to evaluate the performance
and health of the business
The Decision-Making Process correct answers Step 1 - Identify the issue
Step 2 - Gather information
Step 3 - Identify alternatives
Step 4 - Select the option that will most likely result in the desired objective = Select best option
Which primary area of accounting generates reports for internal users?
General-purpose accounting
Financial accounting
Management accounting
Governmental accounting correct answers Management accounting
Which group uses financial information to evaluate whether a company will be able to repay a
loan?
Lenders
Employees
Management
Investors correct answers Lenders
Which of the primary financial statements reports the resources, obligations, and owner's equity
of a company?
Statement of cash flows
Income statement
Master budget
Balance sheet correct answers Balance sheet
What is the role of the IASB in regulating accounting standards?
Work under the direction of the SEC to establish financial accounting standards
Use legal authority to establish financial accounting standards for U.S. companies
Establish international accounting standards
Work as a subcommittee of the American Institute of Certified Public Accountants (AICPA) to
regulate accounting instruction correct answers Establish international accounting standards
1/1
What group of people make up the FASB?
Senior IRS staff members
Senior SEC staff members
Financial accounting specialists appointed by the U.S. Congress
People from a variety of business-related backgrounds correct answers People from a variety of
business-related backgrounds
What is the role of the GASB in setting accounting standards?
The GASB establishes accounting and financial reporting standards together with the IASB.
The GASB establishes accounting and reporting standards together with the IRS.
The GASB establishes accounting and reporting standards together with the SEC.
The GASB is a private-sector organization that establishes accounting and financial reporting
standards for U.S. state and local governments. correct answers The GASB is a private-sector
, organization that establishes accounting and financial reporting standards for U.S. state and local
governments.
In what way do accountants have an economic incentive to conduct themselves ethically?
*The value of the information produced by accountants is related to the confidence that users
have in the reliability of that information.
*Most computerized accounting systems recognize unethical accounting procedures.
*It is not possible for an unethical accountant to rise to a top management position in a company.
*It is not possible for an unethical accountant to become a certified public accountant. correct
answers The value of the information produced by accountants is related to the confidence that
users have in the reliability of that information.
How is it possible for an accountant to intentionally deceive financial statement users and yet
still technically be in compliance with generally accepted accounting principles (GAAP)?
*There is conflict between FASB rules and SEC rules.
*An accountant can use a computerized accounting system to cover up deceptive practices.
*There is flexibility inherent in the assumptions underlying the preparation of financial
statements.
*The mismatch between the timing of the filing of tax returns and the deadlines for the
completion of the financial statements leaves room for dishonesty. correct answers There is
flexibility inherent in the assumptions underlying the preparation of financial statements.
Your boss approaches you with a concerning letter from the IRS and asks you to explain the role
of the IRS in regulating accounting standards. Based on the role of the IRS, what could be the
problem detailed in the letter?
The company's accounting practices are not up to international accounting standards.
The company's accounting practices are not up to state financial accounting standards.
The company has not filed its taxes in accordance with the law.
The company has not complied with certification requirements for its accounting department.
correct answers The company has not filed its taxes in accordance with the law.
Anika is considering investing in a tech company that is known for developing smart home
appliances. Before investing, Anika first wants to ensure that the company's past financial
performance has been satisfactory and that the company manages its cash flows well. What type
of accounting information would provide this evidence for Anika?
Bank statements
Corporate budget
Financial reports
Cost analysis correct answers Financial reports
Alliah Company just released its public accounting data for 20X9. Which user of accounting
information will monitor this data to ensure that the company is providing sufficient information
for investors?
Customers
Government agencies
Company managers
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