4.01 Understand the need and concept of accounting and finances

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 how the business 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:

• Supervisors

• 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

• determine creditworthiness.

• search for profitable investments.

• decide if funds are available for pay raises.

• 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.