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web.groovymark@gmail.com
- December 5, 2024
Question 01
What is the correct sequence of budgets in a manufacturing business?
A. Sales, production, direct materials
B. Direct materials, sales, production
C. Production, sales, direct materials
D. Sales, direct materials, production
Answer: A
Explanation: The budgets in a manufacturing business typically follow the sequence of sales, production, and direct materials to ensure adequate resources for production based on expected sales.
Question 02
Which group establishes financial accounting rules in the United States?
A. International Accounting Standards Board (IASB)
B. Securities and Exchange Commission (SEC)
C. Financial Accounting Standards Board (FASB)
D. American Institute of Certified Public Accountants (AICPA)
Answer: C
Explanation: The Financial Accounting Standards Board (FASB) is the primary body responsible for setting accounting rules in the United States, known as Generally Accepted Accounting Principles (GAAP).
Question 03
Why might employees be interested in their company’s financial accounting information?
A. To evaluate company ownership
B. To determine possible mergers
C. To calculate their bonuses
D. To predict stock prices
Answer: C
Explanation: Financial statement data are often used to calculate employee bonuses, making employees interested in the company's financial performance.
Question 04
Which report is one of the three primary financial statements?
A. Statement of retained earnings
B. Statement of cash flows
C. Statement of equity
D. Statement of dividends
Answer: B
Explanation: The statement of cash flows is one of the three primary financial statements, along with the balance sheet and the income statement.
Question 05
A company borrowed $80,000 cash from a bank. How does this transaction affect the accounting equation?
A. Assets increase by $80,000; liabilities increase by $80,000
B. Assets decrease by $80,000; equity increases by $80,000
C. Liabilities decrease by $80,000; equity decreases by $80,000
D. Assets increase by $80,000; equity decreases by $80,000
Answer: A
Explanation: When a company borrows cash, it increases both its assets (cash) and its liabilities (the loan amount).
Question 06
What is the effect of expenses on the accounting equation?
A. Expenses decrease liabilities
B. Expenses increase assets
C. Expenses decrease equity
D. Expenses increase revenues
Answer: C
Explanation: Expenses reduce the owners' equity in the company because they represent costs incurred by the business.
Correct Answer: A) One database, multiple instances
Explanation: With Real Application Clusters, multiple instances (nodes) can mount one database.
Question 07
Which type of account are accounts payable and notes payable examples of?
A. Asset
B. Equity
C. Liability
D. Revenue
Answer: C
Explanation: Both accounts payable and notes payable are liability accounts, representing the amounts the company owes to others.C
Question 08
What is the purpose of the financial accounting cycle?
A. To report profits to employees
B. To gather information related to the expenses and income generated by a company
C. To determine the tax liability of the company
D. To calculate stock prices for investors
Answer: B
Explanation: The financial accounting cycle collects and processes financial transactions to generate useful information about the company's performance and financial position.
Question 09
According to the accounting equation, the amount of liabilities and equity must always be equal to which other amount?
A. Revenues
B. Cash flow
C. Profits
D. Assets
Answer: D
Explanation: The accounting equation states that assets must always equal the sum of liabilities and equity.
Question 10
Which item is an expense item?
A. Accounts receivable
B. Inventory
C. Cost of goods sold
D. Retained earnings
Answer: C
Explanation: Cost of goods sold is an expense related to the production of goods sold by a company.
Question 11
How is gross profit computed?
A. Sales minus cost of goods sold
B. Sales plus cost of goods sold
C. Revenue minus expenses
D. Sales minus operating expenses
Answer: A
Explanation: Gross profit is calculated as the difference between sales and the cost of goods sold, reflecting the profit from core operations before deducting other expenses.
Question 12
Which type of account is retained earnings?
A. Liability
B. Asset
C. Equity
D. Revenue
Answer: C
Explanation: Retained earnings are part of equity, representing the cumulative earnings of the company that have not been distributed as dividends.
Question 13
For purposes of cash flow classification in the statement of cash flows, which item is an operating activity?
A. Borrowing money
B. Paying employees
C. Purchasing land
D. Issuing stock
Answer: B
Explanation: Operating activities include day-to-day transactions such as paying employees, purchasing inventory, and collecting payments from customers.
Question 14
How does a classified balance sheet provide useful information to a decision maker?
A. It distinguishes between current and long-term assets
B. It calculates net income for the period
C. It only focuses on equity transactions
D. It separates revenues from expenses
Answer: A
Explanation: A classified balance sheet helps decision-makers by showing the distinction between short-term (current) and long-term assets and liabilities.
Question 15
What information does a balance sheet provide to a decision maker?
A. Summary of cash inflows and outflows over a period
B. Detailed record of revenue and expenses
C. Summary of the financial position of a company at a particular date
D. List of projected future revenues
Answer: C
Explanation: The balance sheet provides a snapshot of the financial position of a company, showing its assets, liabilities, and equity at a specific point in time.
Question 16
What is an account payable?
A. An amount owed to a company by its customers
B. A liability for goods or services a company has purchased on credit
C. An asset related to the company’s investments
D. Equity shares issued by the company
Answer: B
Explanation: Accounts payable represent amounts owed by a company to its suppliers or vendors for goods or services purchased on credit.
Question 17
Why is the net cash for December negative while total sales for December are the highest out of the months from October through December?
A. The company paid off a large debt in December
B. Total cash available does not reflect December sales because there was a high volume of credit sales
C. December expenses were unusually high
D. The company made a large capital investment in December
Answer: B
Explanation: The company's cash flow is negative because many December sales were made on credit, meaning cash was not collected immediately.
Question 18
Managerial accounting focuses on which type of information?
A. Financial information for internal decision-making
B. Reporting financial results to external stakeholders
C. Tracking stock market performance
D. Auditing a company’s tax compliance
Answer: A
Explanation: Managerial accounting provides financial information used for internal planning, control, and decision-making processes.
Question 19
Financial accounting focuses on reporting financial information to which group?
A. Internal management
B. External parties such as stockholders, creditors, and regulators
C. A company’s marketing team
D. Tax authorities only
Answer: B
Explanation: Financial accounting is concerned with providing financial reports to external stakeholders such as investors, creditors, and regulators.
Question 20
What is looked at in managerial accounting?
A. Budgeting, product costs, performance evaluation, and breakeven analysis
B. Stock price fluctuations and investor returns
C. External reporting compliance
D. Customer satisfaction metrics
Answer: A
Explanation: Managerial accounting deals with internal operations, including product costs, budgeting, and performance evaluation, all aimed at helping managers make informed decisions.
