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WorksheetsFerg Acctg Quiz 2 (9/20/19) 50 Q (BR 7, 9, 10, 11, 12)
Total questions: 50
Worksheet time: 25mins
What has technology done to the accounting process?
Simplified it
Eliminated it
Made it harder
Had no effect
Dan's organization stores their software applications and other information on a group of external computers known as virtual network servers. Employees often refer to this storage space as the _____.
cloud
hub
virtual private network
virtual machine
Ethics are defined as _____.
the discipline dealing with what is good and bad and with moral duty and obligation
established legal code for particular business practices
the ability to define legal guidelines for your company
the discipline that deals with decision making
Bob is the CEO of ABC Hydraulics. Bob is committed to ethical business practices. He ensures that his investors are kept well-informed of the state of the company. As part of his commitment to transparency and ethical practices, he prefers that the top level executives don't see the inner workings of the company's financials so that they aren't tempted to try to defraud the company by embezzling. Is this complying with SOX (Sarbanes-Oxley Act)?
No, SOX mandates that top level executives must certify that financial information is accurate.
Yes, SOX doesn't regulate anything mentioned in the above scenario.
Yes, SOX is only concerned with the penalties for noncompliance.
No, SOX demands that the CEO outsource the financials to a trusted confidant.
Which law was enacted as a direct result of the unethical financial practices of both Enron and Arthur Andersen?
SOX (Sarbanes-Oxley Act)
FASB (Financial Administration Systems Board)
IFSB (International Financial Systems Board)
SEC (Securities & Exchange Commission)
Who investigated Arthur Andersen and Enron?
SEC (Securities & Exchange Commission)
FASB (Financial Administration Systems Board)
GAAP (Government Administrative Action Protocol)
IFSB (International Financial Systems Board)
When preparing a financial statement, which document must be completed first?
Income statement
Statement of retained earnings
Balance sheet
Statement of cash flow
What are the entries called that close temporary accounts?
Closing entries
Adjusting entries
Ledgers
Journals
How many steps are in the accounting cycle?
10
3
7
9
How many basic accounting principles make up GAAP?
10
4
7
18
While creating a disaster plan, AccountIng decides that it needs off-site data storage. Which of the following would they use to store the information?
Cloud storage
Flash drive
Encryption
Hard drive
Which of the following would be the most significant contribution of technology to accounting?
Off-site storage and data processing systems
Price decreases due to new systems
Hyper processing speeds
Third party codification of accounting principles
Which report in the financial statement would compare the assets to the sum of the liabilities and equity?
Balance sheet
Cash flow statement
Statement of change of equity
Income statement
Which type of external user would most commonly use audited financial statements?
Investors
IRS
Banks
Vendors
Accountants record expenses in the same time period in which they occurred. This is called:
The matching principle
The economic entity assumption
The revenue recognition principle
The cost principle
While auditing a company, you find that several of its employees are not satisfied with their jobs. You decide not to write this in the report because of which of the following reasons?
It is not material to the financial health of the organization
It is not significant to the management
It is not important to an investor
It is not part of your job duties
The Committee on Accounting Procedure is part of which organization?
Financial Accounting Standards Board
Security and Exchange Commission
International Financial Reporting Board
Federal Depository Insurance Commission
Who is LEAST likely to use accounting reports for decision making?
Customers
Senior management
Banks
Investors
You have invested $30,000 of your money into your company. In what part of the financial statements would you find this information?
On the balance sheet under equity
On the balance sheet under liabilities
On the income statement under assets
On the income statement under current expenses
Where will you find the total amount that is owed to your business by customers?
Under accounts receivable on the balance sheet
Under accounts receivable on the cash flow statement
Under accounts receivable on the statement of equity
Under accounts receivable on the income statement
Which of the following pieces of legislation is the result of the Enron scandal?
Sarbanes-Oxley Act
Truth In Advertising Act
Fair Trade Act
Family Leave Act
Why is accounting important to business? (mark all that apply)
It lets a business owner know what his assets are worth.
It lets a business owner know how much money he is making.
It provides the information that a business needs to file taxes with the IRS
It lets a business owner know how much money he is spending.
What does the term 'accounting' mean?
The act of collecting, organizing, and interpreting financial data
The act of filing receipts from transactions
The act of recording financial data to be used later
The act of reporting data
Which of the following is NOT a financial statement?
Accounting cycle
Balance sheet
Statement of retained earnings
Statement of cash flows
Which company, listed on the New York Stock Exchange would definitely be in breach of the Going Concern Principle?
Company D, which has run out of cash and is now not able to pay its creditors.
Company C, which shows a net cash outflow in its statement of cash flows.
Company B, which has made a net loss this financial year.
Company A, which has decided to issue new shares to foreign nationals.
Michael, the majority shareholder of a company, decided to produce the company's balance sheet whose cash balance included the cash in his own bank account. Would Michael be allowed to do this by GAAP?
No, because of the economic entity assumption.
Yes, because of the going concern principle.
No, because of the revenue recognition principle.
Yes, because of the full disclosure principle.
Which of the following would need an external audit? (mark all that apply)
A company trying to demonstrate transparency to potential investors
A company about to offer stock on the stock market
A non-profit attempting to secure a large, government grant
Why would an investor require a third party audit of a potential portfolio company?
To know that the company has taken all possible measures to be accurate with their financial statements
To get an independent person to verify that everything is totally correct
To make sure there is no fraud
To show the company's management that the investor is serious about the investment
Which of the following is a job of an auditor?
Verify accuracy of information
Handle the bookkeeping for the organization
Create guidelines for accounting
Report legal breaches to the authorities
Where would an investor find information about the total revenue and expenses of a company.
The income statement
The statement of change in equity
The cash flow statement
The balance sheet
The net income is derived from which pieces of information?
Revenue and expense
Taxable income and liabilities
Liabilities and equity
Long term and short term debt
From a balance sheet, the assets less the owner's equity will equal which of the following?
Liabilities
Revenue
Accounting ratios
Long term debt
If a sister sold a house to her brother, this would be suspicious to an investor because of which of the following reasons?
It is not an arm's length transaction
It is seldom a good idea to do business with family
There would be a cloud on the title
It would be coming from the same pool of money
Your plumbing company fixed the shower for Jane Smith. You have invoiced Jane for $1,000 but she has not paid yet. Using the accrual method of accounting, how much should you show as income?
$1,000
$500
$0
One-twelfth of $1,000
Which method of accounting is preferred under GAAP?
Accrual
Whichever the IRS uses
Cash
Income
An auditor makes a note that there is a patent lawsuit. After the audit is complete, the company losses the lawsuit. If the auditor noted this as a recognized event, what would need to be done?
The financial statements would need to be changed to reflect the lawsuit
The note would need to be removed
No changes would need to be made
A new letter from the auditor would need to be added
Which of the following would be a cash outflow operating activity for a small healthcare manufacturer?
Cost of the raw materials
An accounting of bad debt
Paying the staff
Revenue from a new order
How is a cash flow statement different from an income statement?
A cash flow statement shows actual cash received and expended. Income statements show all revenue and expense.
Cash flow also compares the assets to the equity
Income statement shows cash received and expensed. Cash flow statements show all revenue and expense.
Both are the same.
A balance sheet compares liabilities and equity to which of the following?
Assets
Revenue
Salaries
Debt
A balance sheet compares liabilities and equity to which of the following?
Assets
Salaries
Debt
Revenue
Your plumbing company fixed the shower for Jane Smith. You have invoiced Jane for $1,000 but she has not paid yet. Using the cash method of accounting, how much should you show as income?
$0
$1,000
$1,000 plus a late fee
$500
Why might potential investors and creditors look at a company's financial statements?
To see if they would like to enter into a financial relationship with the company
To see how much they have gained or lost in the company
To see how many employees the company has
To see if any of their money has been retained by the company
Which financial statement shows how much money that a company made was retained and reinvested in the company?
Statement of Retained Earnings
Balance Sheet
Income Statement
Statement of Cash Flows
Identify the person that reviews the audit report of a company to see if the company is being compliant with the law?
Regulator
Auditor
Adjustor
Examiner
When a criminal case is tried, the stenographer writes down every word of the proceeding. How does the principle of monetary management differ?
Every single accounting action recorded deals with money.
Depreciation of assets should be kept as a separate log.
Any transaction should recorded for IRS audit purposes.
Only transactions where money is paid out are recorded.
Which of the following is the equation used for the basic income statement?
Revenue - Expenses = Net Income or Net Loss
Expenses + Revenue = Net Income or Net Loss
Revenue / Expenses = Net Income or Net Loss
Revenue + Expenses = Net Income or Net Loss
What is the section of the statement of cash flows that includes activities that occur during the normal day-to-day operations of a company?
Operating
Equity
Assets
Financing
The balance sheet is a part of which of the following?
Financial Statements
Income Statement
Statement of Cash Flows
Statement of Retained Earnings
What is a liability that has not yet occurred but the conditions are favorable that it will occur called?
Contingent liability
Unrecognized event
Recognized liability
Subsequent event liability
Which is correct?
Debit is Left, Credit is Right
Credit is Left, Debit is Right
Debit increases, credit decreases
Credit increases, debit decreases
