Question 1

What does accounting focus on?

Accepted Answer

The impact a business's activities have on its overall financial performance

Question 2

Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?

Accepted Answer

Statement of cash flows

Question 3

Which users would have a primary concern with an organization’s ability to provide healthcare benefits?

Accepted Answer

Employees

Question 4

Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)?

Accepted Answer

An increase in its comparability to other companies

Question 5

Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company?

Accepted Answer

The Public Company Accounting Oversight Board (PCAOB)

Question 6

What has had the most significant impact on accounting practices?

Accepted Answer

Information technology

Question 7

What two items of information are revealed on the balance sheet?

Accepted Answer

1. Ownership
2. Debt

Question 8

Which term is defined as the residual interest in the net assets of a company?

Accepted Answer

Owners’ equity

Question 9

A corporation has total liabilities of $300 million, total owners’ equity of $100 million, and current assets of $50 million.

Accepted Answer

$350 million

Question 10

Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting?

Accepted Answer

In 2014, a company provides services to a customer for which cash will be collected the next year (2015).

Question 11

Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?

Accepted Answer

Cash flows from financing activities

Question 12

Where would an investor find a summary of a company’s significant accounting policies?

Accepted Answer

In the notes to financial statements

Question 13

Which assurance does an external audit report provide for its readers?

Accepted Answer

The company’s financial statements fairly reflect its financial position

Question 14

Reliable

Accepted Answer

Information that can be verified

Question 15

Relevant

Accepted Answer

Information having to do with the matter at hand

Question 16

Material

Accepted Answer

Information that is important enough to make a difference

Question 17

Conservatism

Accepted Answer

Information related to recognizing losses as they occur

Question 18

Order the steps in the decision cycle from first (1) to last (5).

Accepted Answer

1. Prepare financial statements
2. Analyze financial statements
3. Gather information
4. Make decision
5. Implement decision

Question 19

What does it mean if a company has a debt ratio of 101.5%?

Accepted Answer

The company has 1.5% more total liabilities than total assets.

Question 20

What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same?

Accepted Answer

Continual decrease in sales

Question 21

Which formula yields a cash times interest earned ratio of 11?

Accepted Answer

Cash before interest and taxes of $11,000 / cash paid for interest of $1,000

Question 22

Which form of debt should be reported in the long-term liability category?

Accepted Answer

Notes payable expected to be paid in 18 months

Question 23

Which two values affect the measurement of net income?

Accepted Answer

1. Operating expenses
2. Ordinary gains and losses

Question 24

Which two items’ subtotals are included in a multi-step income statement?

Accepted Answer

1. Gross profit
2. Income from operations

Question 25

What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?

Accepted Answer

$153,279

Question 26

What is a common category in a statement of cash flows?

Accepted Answer

Cash from investing activities

Question 27

Which cash flow category would include "cash received from investors"?

Accepted Answer

Cash from financing activities

Question 28

Which item is an investing activity?

Accepted Answer

Cash payments for purchase of plant assets

Question 29

What impact does the sale of equipment have on the statement of cash flows?

Accepted Answer

Increase in cash from investing activities

Question 30

Which two examples represent financial statement errors?

Accepted Answer

1. The accounting department miscalculates the payr oll tax due at year-end, resulting in an inaccurate liability
2.The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned

Question 31

Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received?

Accepted Answer

The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.

Question 32

What are two common reasons for managers to manipulate reported earnings?

Accepted Answer

1. They are feeling pressured to meet internal sales goals.
2.They are preparing to qualify for a bank loan.

Question 33

Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act?

Accepted Answer

1. Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services.
2. Firms must report to and be retained by the audit committee rather than the CFO or other company management.

Question 34

Which two requirements must management of public companies meet under the Sarbanes-Oxley Act?

Accepted Answer

1. They must provide an assessment of the effectiveness of internal controls with each annual report.
2. They must support a stronger board and audit committee.

Question 35

Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements

Accepted Answer

1. They search for and investigate fraud.
2. They review financial records and internal controls.

Question 36

What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting?

Accepted Answer

They ensure that financial statement users are provided with reliable information to use in decision making.

Question 37

What does management accounting provide?

Accepted Answer

1. The insight that management needs so the business can perform more effectively
2. The detailed data that managers need to make decisions that will give the business a competitive edge

Question 38

How does management accounting differ from financial accounting?

Accepted Answer

Management accounting is used primarily for internal planning, control, and evaluation.

Question 39

Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company?

Accepted Answer

Inventory

Question 40

What is a cost that will change in the future based upon the decision made?

Accepted Answer

Differential cost

Question 41

Which two examples are period costs?

Accepted Answer

1. Administrative expenses
2. Selling expenses

Question 42

A company manufactures custom-built wooden bookshelves.
Which two costs would the company classify as period costs?

Accepted Answer

1. Salary cost of the receptionist
2. Advertising cost

Question 43

What role do ethical standards have in management accounting?

Accepted Answer

To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter

Question 44

Which two costs are included when calculating inventory costs?

Accepted Answer

1. Direct labor
2. Overhead

Question 45

In which scenario would activity-based costing be more appropriate than traditional costing?

Accepted Answer

A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead cos

Question 46

Which category of ABC activities are machine setup and material movement costs associated with?

Accepted Answer

Batch-level activities

Question 47

The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control.

Which consideration is an appropriate cost driver?

Accepted Answer

The number of race participants and spectators

Question 48

Which two concepts are studied in cost-volume-profit analysis?

Accepted Answer

1. Profits
2. Levels of activity

Question 49

What are two impacts on costs as sales volume increases?

Accepted Answer

1. Total fixed costs will stay the same.
2. Fixed costs per unit will decrease.

Question 50

A period cost is an expense that is

Accepted Answer

not directly tied to the production of goods or services

Question 51

Period cost are instead charged to

Accepted Answer

the income statement in the period in which it is incurred

Question 52

Selling expenses (advertising, sales commissions) is an example of

Accepted Answer

Period Cost

Question 53

Administrative salaries (office staff, HR) is an example of

Accepted Answer

Period Cost

Question 54

Rent for office buildings Is an example of

Accepted Answer

Period Cost

Question 55

Utilities for corporate offices is an example of

Accepted Answer

Period Cost

Question 56

Depreciation of office equipment Is an example of

Accepted Answer

Period Cost

Question 57

Why is ABC more accurate?

Accepted Answer

t assigns overhead based on actual activities and cost drivers instead of using one general allocation base.

Question 58

Difference between operating and financing cash flows

Accepted Answer

Operating: Day-to-day business activities (sales, wages, rent)

Financing: Borrowing, repaying debt, issuing stock, dividends

Question 59

What happens to retained earnings when net income increases?

Accepted Answer

Retained earnings increase.

Question 60

Why are prepaid expenses assets?

Accepted Answer

Because they represent a future economic benefit.

Question 61

What is a differential cost?

Accepted Answer

A cost that changes depending on the decision made.

Question 62

Contribution margin per unit equals

Accepted Answer

Selling price – Variable cost

Question 63

Equipment

Accepted Answer

is an item that shows on the Balance sheet

Question 64

If contribution margin per unit is $25 and fixed costs are $125,000, break-even units equal

Accepted Answer

5,000

Question	Answer
What does accounting focus on?	The impact a business's activities have on its overall financial performance
Which report summarizes cash collections and cash expenditures from operating, investing, and financing activities over a period of time?	Statement of cash flows
Which users would have a primary concern with an organization’s ability to provide healthcare benefits?	Employees
Which benefit does a corporation gain by following Generally Accepted Accounting Principles (GAAP)?	An increase in its comparability to other companies
Which body regulates a certified public accounting firm’s audit practices when the firm is auditing a large publicly traded company?	The Public Company Accounting Oversight Board (PCAOB)
What has had the most significant impact on accounting practices?	Information technology
What two items of information are revealed on the balance sheet?	1. Ownership 2. Debt
Which term is defined as the residual interest in the net assets of a company?	Owners’ equity
A corporation has total liabilities of $300 million, total owners’ equity of $100 million, and current assets of $50 million.	$350 million
Which situation should result in revenue recognition on the income statement for the year ending 12/31/14 if the firm is using accrual-basis accounting?	In 2014, a company provides services to a customer for which cash will be collected the next year (2015).
Which category on the statement of cash flows summarizes cash receipts and payments to owners and creditors of the company?	Cash flows from financing activities
Where would an investor find a summary of a company’s significant accounting policies?	In the notes to financial statements
Which assurance does an external audit report provide for its readers?	The company’s financial statements fairly reflect its financial position
Reliable	Information that can be verified
Relevant	Information having to do with the matter at hand
Material	Information that is important enough to make a difference
Conservatism	Information related to recognizing losses as they occur
Order the steps in the decision cycle from first (1) to last (5).	1. Prepare financial statements 2. Analyze financial statements 3. Gather information 4. Make decision 5. Implement decision
What does it mean if a company has a debt ratio of 101.5%?	The company has 1.5% more total liabilities than total assets.
What is consistent with a continual decline in gross profit if the firm's cost of goods sold remains the same?	Continual decrease in sales
Which formula yields a cash times interest earned ratio of 11?	Cash before interest and taxes of $11,000 / cash paid for interest of $1,000
Which form of debt should be reported in the long-term liability category?	Notes payable expected to be paid in 18 months
Which two values affect the measurement of net income?	1. Operating expenses 2. Ordinary gains and losses
Which two items’ subtotals are included in a multi-step income statement?	1. Gross profit 2. Income from operations
What was the 2012 net profit amount if the 2013 pro-forma net profit of $187,000 was based on a 22% increase?	$153,279
What is a common category in a statement of cash flows?	Cash from investing activities
Which cash flow category would include "cash received from investors"?	Cash from financing activities
Which item is an investing activity?	Cash payments for purchase of plant assets
What impact does the sale of equipment have on the statement of cash flows?	Increase in cash from investing activities
Which two examples represent financial statement errors?	1. The accounting department miscalculates the payr oll tax due at year-end, resulting in an inaccurate liability 2.The accountant unintentionally records amounts as revenue that were prepaid by customers but not yet earned
Which internal control is intended to ensure that a company does not mistakenly pay a supplier for an invoice that includes more items than were actually received?	The inventory department counts and inspects items as received and forwards the receiving record to accounts payable.
What are two common reasons for managers to manipulate reported earnings?	1. They are feeling pressured to meet internal sales goals. 2.They are preparing to qualify for a bank loan.
Which two requirements must accounting firms that audit public companies meet under the Sarbanes-Oxley Act?	1. Firms must not provide certain nonaudit services to audit clients, such as management functions or legal services. 2. Firms must report to and be retained by the audit committee rather than the CFO or other company management.
Which two requirements must management of public companies meet under the Sarbanes-Oxley Act?	1. They must provide an assessment of the effectiveness of internal controls with each annual report. 2. They must support a stronger board and audit committee.
Which two actions do internal auditors perform to assist in maintaining the integrity of financial statements	1. They search for and investigate fraud. 2. They review financial records and internal controls.
What is a significant role of the U.S. Securities and Exchange Commission (SEC) in financial reporting?	They ensure that financial statement users are provided with reliable information to use in decision making.
What does management accounting provide?	1. The insight that management needs so the business can perform more effectively 2. The detailed data that managers need to make decisions that will give the business a competitive edge
How does management accounting differ from financial accounting?	Management accounting is used primarily for internal planning, control, and evaluation.
Which account is seen on the balance sheet of a manufacturing company but not on the balance sheet of a service-oriented company?	Inventory
What is a cost that will change in the future based upon the decision made?	Differential cost
Which two examples are period costs?	1. Administrative expenses 2. Selling expenses
A company manufactures custom-built wooden bookshelves. Which two costs would the company classify as period costs?	1. Salary cost of the receptionist 2. Advertising cost
What role do ethical standards have in management accounting?	To guide the resolution to possible ethical dilemmas that the managerial accountant may encounter
Which two costs are included when calculating inventory costs?	1. Direct labor 2. Overhead
In which scenario would activity-based costing be more appropriate than traditional costing?	A company produces five different products. The products are highly differentiated and have significantly different demands for their use of overhead cos
Which category of ABC activities are machine setup and material movement costs associated with?	Batch-level activities
The director of a marathon race wants to assign the cost of having police officers along the race route to manage crowd control. Which consideration is an appropriate cost driver?	The number of race participants and spectators
Which two concepts are studied in cost-volume-profit analysis?	1. Profits 2. Levels of activity
What are two impacts on costs as sales volume increases?	1. Total fixed costs will stay the same. 2. Fixed costs per unit will decrease.
A period cost is an expense that is	not directly tied to the production of goods or services
Period cost are instead charged to	the income statement in the period in which it is incurred
Selling expenses (advertising, sales commissions) is an example of	Period Cost
Administrative salaries (office staff, HR) is an example of	Period Cost
Rent for office buildings Is an example of	Period Cost
Utilities for corporate offices is an example of	Period Cost
Depreciation of office equipment Is an example of	Period Cost
Why is ABC more accurate?	t assigns overhead based on actual activities and cost drivers instead of using one general allocation base.
Difference between operating and financing cash flows	Operating: Day-to-day business activities (sales, wages, rent) Financing: Borrowing, repaying debt, issuing stock, dividends
What happens to retained earnings when net income increases?	Retained earnings increase.
Why are prepaid expenses assets?	Because they represent a future economic benefit.
What is a differential cost?	A cost that changes depending on the decision made.
Contribution margin per unit equals	Selling price – Variable cost
Equipment	is an item that shows on the Balance sheet
If contribution margin per unit is $25 and fixed costs are $125,000, break-even units equal	5,000
Selling Expenses and Administrative Salaries examples of	Period Costs
Direct material and Manufacturing Overhead are examples of	Inventory costs
Issuing bonds and paying dividends are examples of	Financing Activities
What appears on Balance sheet	Assets and Liabilities
Management accounting is used for	Internal Planning & Decision Making
A company sells 8,000 units. Selling price = $40 Variable cost = $25 Fixed costs = $80,000 What is net income?	Revenue = 8,000 × 40 = 320,000 Variable cost = 8,000 × 25 = 200,000 Contribution margin = 120,000 Net income = 120,000 − 80,000 (fixed cost) = 40,000
n Activity-Based Costing (ABC), we categorize costs based on the	'level' at which they occur
Unit-level activities are performed for	Each individual unit of product. For example, the direct labor to assemble one specific product.
Batch-level activities are performed for	each batch of products, regardless of the number of units in that batch
Retained earnings increase	when net income increases
Balance sheet: reveals	what a company owns and what it owes
Income statement: provides	the accountant's best attempt at measuring the economic performance of a company
Statement of cash flows: outlines	where a company gets its cash and how it spends that cash
Obtained or controlled	accountants have a phrase, "substance over form," meaning that financial statements should reflect the underlying economic substance and not the superficial legal form
When a company buys back its own shares, accountants call the repurchased shares	Treasury stock
Treasury stock is shown as a subtraction in the stockholders' equity section of the	Balance Sheet
Example of Assets	Cash, AR, or Loans receivable (money to collect in the future), land, building. inventory,
Balance sheet lists	Assets , Liability and equity
Example of Liability	Accounts Payable, Wages Payable, Taxes payable, Long term debt
Owners equity is	The amount owners have invested in a company
Paid in capital	Owners take out in their personal savings and invest in their business AKA Capital Stock or Capital Contributions
2 samples of Equity	Paid in Capital and Retained Earnings
Under accrual accounting revenue is recognized when	goods are delivered to the customer
When do you record exepenses	Direct matching as with cost of good sols
Statement of cashflows answers 3 questions	1. Where did the cash come from? 2. What was the cash used for? 3. What was the change in the cash balance?
Indirect method are use more	frequently by US companies.
Operating Activities section begin with NET Income and	adjusts it to cash bais net income
Direct method is generally	easier for users to understand.
Cash Receipts and Cash Payments/Disbursements	are part of the Statement of cashflows
What is the difference between paying and receiving dividends	Paying dividends financing activity, Receiving dividends is an operating activity
accounting involved documenting	a companys daily financial transactions and organizy into summary reports
Bookkeeping the systematic	recording of quantitative data related ti business activities
FASB	financial accounting standards board- Sets accounting standards for US companies
SEC	Securities and Exchange commission- Enforces securities laws and regulations
American Institute of Certified Public Accountants (AICPA)	Provides guidance and standards for CPAs
International Accounting Standards Boards	Develops global accounting standards
The primary internal group that uses accounting information is	management
The emphasis in financial accounting is on which of the following externa user groups	Investors and creditors
Notes in financial statements	if you want to know you go to the notes, = details about financial statements
Vital information that CANNOT be captured solely by dollar amounts is reported in the	notes of the financial statements
Current assets are examples of	Cash, Accounts Receivable, inventory, prepaid insurance/rent
tax expense goes in the	income statement
Tax payable goes in	the Balance sheet
Payable is paid in the	future
Common stock	Going to increase
retained earnings is money retained in the	business
Retained earning will increase with	revenue
Retained earning will decrease with	expenses
Retained earning will decrease with	dividends
Retained earning will decrease with	net loss
Treasury stock is when company goes in the stock market	to buy their own stock back
Depreciation is a	contra asset
Treasury stock id always in	parenthesis (- $$$$)
Equity =	RE CS TS TS
Which of the following decreases owners equity	operations generate a loss
Income Statement	REN
Very first line in an income statement is	Revenue
Payable is also	Liabilities
Payable goes on the	Balance Sheet
Net income is on the	Income Statement
Wages and Salaries	Operating Expense
Payroll Taxes	Operating Expense
Rent Expense	Operating Expense
Repair Expenses	Operating Expense
Gross profit is the difference between	Sales and cost of good sold
Income statement	Sales- Cost of good sold= Gross Profit
Cash Receipts from: Sale of goods or services	Operating Activities
Cash Receipts from: Sale of trading securities	Operating Activities
Interest revenue is	Operating Activities
Dividend Revenue	Operating Activities
Inventory purchases is	Operating Activities
Interest expense	Operating Activities
Taxes are an	Operating Activities
Cash payment for purchase of plant assets	Investing Activities
Cash Payment of non trading securities	Investing Activities
Making loans to other entities	Investing Activities
Issuance of stock	Financing Activities
Payments for Cash dividends	Financing Activities
Repayment of loans	Financing Activities
Repurchases of stock (Treasury Stock)	Financing Activities
Borrowing	Financing Activities
Collection of principal on loans	Investing Activities
Sales Receipts	Operating ( Cash inflow +)
Inventory Payments	Operating ( Cash Outflow)
Interest Payments	Operating (Cash outflow)
Wage Payments	Operating (Cash Outflow)
Dividends Receipts	Operating (Cash Inflow +)
Interest Receipts	Operating ( Cash inflow +)
Equipment Purchased	Investing (Cash Outflow -)
Stick Purchased	Investing (Cash Outflow -)
Stock issued	Financing ( Cash inflow +)
Debt Ratio	Total Liabilities/Total Assets
Two Branches of Accounting	Financial and Managerial
Gains/Losses are on	Income Statement

C213- PA deck

C213- PA Deck

"Know" box contains:
Time elapsed:
Retries: