Advanced Acctg Chapter 1

In Luca Pacioli's 15th century book "The Summa" the accounting system he describes uses three books. Which of the books are not used in today's accounting system?

• 
  Memorandum

• 
  Ledger

• Journal

• All the books are still used today

A company that only prepares financial statements when it is convenient for the management of the firm is violating which of the following accounting concepts.

• 
  business entity concept

• going concern concept

• monetary unit concept

• 
  periodicity concept

In its annual report the Jones Farm Supply reported the number of trailers it had in stock, rather than the cost in dollars of the trailers. This violates which of the following concepts:

• 
  going concern concept

• monetary unit concept

• periodicity concept

• business entity concept

Mutual agency and unlimited liability is the characteristic of which of the following business entity?

• merchandise

• 
  corporation

• 
  sole proprietorship

• partnership

Because this type of business is considered a separate legal entity it rather than its owners are taxed.

• 
  sole proprietorship

• 
  corporation

• 
  partnership

• manufacturer

Generally accepted accounting principles (GAAP) are authoritative pronouncements that define what constitutes acceptable accounting practice for financial reporting. GAAP today is set by:

• FASB - Federal Accounting Standards Board, an agency of the federal government

• FASB - Financial Accounting Standards Board, a private standard setting organizations.

• 
  SEC - the Securities and Exchange Commission

• 
  AICPA - the American Institute of Certified Public Accountants

Which of the following statements about the use of accounting information by the marketing function is true?

• People in the marketing function use market rather than accounting information to set selling prices.

• Accounting information would be needed to select the best alternative for getting the firm's product to its customers.

• 
  The marketing function would let the accounting function make pricing decision for a product when the product cost was involved in making the pricing decision.

• 
  Consumer preference is used in place of accounting information when making product-selection decisions.

The Report of the Independent Auditor is the opinion of the CPA firm that examined the financial statements of a company and states which of the following/

• The company is a good long-term investment.

• The financial statements are fairly presented.

• The financial statements are free from fraud and correct.

• The financial statements are presented fairly in accordance with GAAP.

Which of the following is not true about the relationships between the financial statements?

• The ending balances of the retained earnings found in the Statement of Changes in Stockholders' Equity are found on the Balance Sheet.

• The net income reported on the Income Statement is also found on the Statement of Cash Flows.

• 
  The cash inflows identified on the Statement of Cash Flows are reported on the Income Statement

• The cash reported on the Balance Sheet is reported on the Statement of Cash Flows.

Which of the following is not true about the return on sales ratio?

• It is measured with the following formula: Net Income / Total Sales

• All things being equal, the higher the return on sales ratio the more profitable the company.

• It measures the profitability and liquidity of the firm.

• A company can increase its return on sales by decreasing its expenses and increasing its sales in the same time period.