study questions

Question 1

The professional organization for Certified Public Accountants in the US is the

Answer 1

American Institute of Certified Public Accountants AICPA

Question 2

T/F company stock values are influenced most significantly by investors’ changing expectations of a company’s future earnings

Answer 2

true

Question 3

T/F The primary purpose of financial accounting is to communicate information to the managers of a business

Answer 3

False

Question 4

A disadvantage of the corporate form of business ownership is

Answer 4

possible double income taxation on profits distributed to the company owners

Question 5

T/F the novo mercado is a Brazilian stock market that has been proposed primarily for the listing of foreign, non-Brazilian stocks in order to make investment in such companies more accessible to Brazilian investors

Answer 5

False

Question 6

t/f The SEC is considering the allowance of international accounting standards for companies wishing to access US capital markets but such a policy is opposed by the FASB and many US corporations

Answer 6

True

Question 7

T/F the IASB is a London based organization that has been established to require and enforce the use of international accounting standards in countries receiving funds through the IMF

Answer 7

False

Question 8

The preparation and accuracy of a company’s financial statements and compliance with GAAP is primarily the responsibility of the company’s

Answer 8

management

Question 9

t/f stock selling at a low P/E ratio is more characteristic of a growing company than one that has stabilized earnings

Answer 9

false

Question 10

t/f a sporting goods store in the local mall is an example of a merchandising business

Answer 10

true

Question 11

t/f an income statement reflects a company’s results from operations for a period of time

Answer 11

true

Question 12

the classification of assets and liabilities as either currency or long-term is useful to financial statement users because it helps evaluate a company’s

Answer 12

liquidity

Question 13

t/f 3 general purpose financial statements required under GAAP are the income statement, statement of operations and statement of cash flows

Answer 13

False

Question 14

What is another name of the income statement?

Answer 14

statement of operations

Question 15

T/F accounts receivable from reliable and credit worthy customers are not included as assets in a company’s financial statements until actually collected in cash

Answer 15

false

Question 16

if potential investors wished to clarify how a company had been financed to date, they would review the company’s

Answer 16

balance sheet

Question 17

T/F The income statement reflects net income, which is equal to revenues minus expenses and dividends

Answer 17

False

Question 18

financial position refers to

Answer 18

the resources or assets of a business and how those assets have been financed

Question 19

The transactions of a business are first recorded in

Answer 19

a journal and then posted to the general ledger

Question 20

A balancing trial balance means that

Answer 20

the total of all debit account balances equals the total of all credit account balances for the company

Question 21

T/F in a computerized accounting system it is not necessary that the basic accounting equation A=L+OE be maintained in balance

Answer 21

False

Question 22

The general ledger in an accounting system is used to

Answer 22

summarize the effect of all of a business’ transactions on each account of the business

Question 23

A credit to the sales revenue account

Answer 23

increases revenues and increases net income

Question 24

The recording of a cash payment of a utility bill that had not been previously recorded as an expense or a liability would require a debit entry to

Answer 24

an expense account

Question 25

The cash payment of an account payable has the following net effect on the balance sheet

Answer 25

decreases assets and liabilities with no effect on owners’ equity

Question 26

XYZ Company’s sale of inventory to a customer on account requires debits to which 2 accounts on the books of XYZ

Answer 26

accounts receivable and cost of goods sold

Question 27

Liquidity refers to

Answer 27

a company’s ability to pay its debts in the short term

Question 28

A general ledger in an accounting system is used to

Answer 28

summarize the effect of all business transactions on each account of the business