6.01 Basics of Accounting in Business

The process of keeping the financial records of a business is known as

• Accounting
• Controlling
• Financing
• Bookkeeping

The overall purpose of accounting is to

• Maintain accurate reports
• Compile the business’s expenses
• Keep track of sales
• Control the finances of the business

Why are accurate accounting records important to a business?

• They prevent any financial losses
• They show the business how it is doing.
• They increase the return on investments
• They give the business an image of success

Which of the following groups makes regular use of a business’s managerial accounting information:

• Managers
• Customers
• Creditors
• Investors

A creditor is most likely to examine a business’s financial accounting records if the business is

• Applying for a bank loan
• Selecting a new market
• Using cash accounting
• Complying with regulations

Riley is an employee of the federal government who studies the financial reports of major businesses in a specific industry. The government’s purpose in assigning this task to Riley is to

• Verify compliance with laws
• Calculate the businesses’ income taxes
• Analyze employment statistics
• Identify trends in the industry

For an accounting system to be useful to the business, the accounting information it contains must be

• Accurate and up to date
• Approved by the chief executive officer
• Posted by an accountant
• Recorded using the accrual method

Which of the following is a requirement for a good accounting system:

• It should be updated annually
• It should provide needed information quickly
• It should eliminate the need for an accountant
• It should be replaced every two or three years

Two employees used a business’s computerized accounting system to change some records. They were able to steal $50,000 from the business because the accounting system lacked which of the following:

• Protection from theft and fraud
• An affordable price
• A manual system as backup
• Printed financial statements

Checks, receipts, invoices, and purchase orders are examples of

• Financial statements
• Department ledgers
• Source documents
• Accounting standards