Business Essentials Unit 4-Test

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.

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.

What type of accounting method would most likely be used by a large business that has a large number of outstanding loans and customer charge accounts?

• Check method

• Cash method

• COD method

• Accrual method