(Test Bank) Horngren's Accounting

Nobles, 13

Business

Test Bank

13th Edition

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Test Bank for Horngren's Accounting, The downloadable file consists of 2408 pages, and the total size of the file is 16.76 MB. Purchase now only for highly discounted price.

Author(s): Nobles

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Study Note Preview

1 Copyright © 2021 Pearson Education, Inc. Horngren's Accounting: The Fin. Chs., 13e (Miller-Nobles) Chapter F:1 Accounting and the Business Environment Learning Objective F:1-1 1) Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 2) Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine. Answer: FALSE Explanation: Technology plays an important supporting role in performing routine accounting functions. This allows accountants to have more time to focus on reviewing and evaluating economic activities using critical thinking and judgment. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 3) Accounting starts with economic activities that accountants review and evaluate using critical thinking and judgment to create useful information that helps individuals make good decisions. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 4) Accounting is referred to as the language of business because it is the method of communicating business information to decision makers. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 2 Copyright © 2021 Pearson Education, Inc. 5) A model called the ________ was created to help students and the public understand what accounting is. A) Decision Making Model B) Business Model C) Pathways Vision Model D) Cost Model Answer: C Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 6) The Pathways Vision Model emphasizes that good decisions have an impact on ______. A) accounting judgments and economic activity B) accounting judgments only C) economic activity only D) neither accounting judgments nor economic activity Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1) 7) Managerial accounting focuses on providing information for external decision makers. Answer: FALSE Explanation: Managerial accounting focuses on providing information for internal decision makers. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 8) Investors primarily use managerial accounting information for decision-making purposes. Answer: FALSE Explanation: External users (investors) use financial accounting information. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 3 Copyright © 2021 Pearson Education, Inc. 9) A creditor is a person who owes money to the business. Answer: FALSE Explanation: A creditor is a person to whom a business owes money. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 10) Income tax is calculated using accounting information. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 11) Financial accounting focuses on information for decision makers outside of the business, such as creditors and taxing authorities. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 12) Business owners use accounting information to set goals, evaluate progress toward those goals, and make adjustments when needed. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 13) Outside investors ordinarily use financial accounting information to decide whether or not to invest in a business. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 4 Copyright © 2021 Pearson Education, Inc. 14) A creditor is any person who has an ownership interest in a business. Answer: FALSE Explanation: A creditor is any person to whom money is owed. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 15) Managerial accounting focuses on information needed by lenders, customers, and the federal government. Answer: FALSE Explanation: Financial accounting focuses on providing information for external decision makers, such as lenders, customers, and the federal government. Diff: 1 LO: F:1-1 AACSB: Interpersonal relations and teamwork AICPA Functional: Reporting PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 16) Any person or business to whom a business owes money is called the business's creditor. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 17) Decision makers are looking for an international accounting language because the most significant change in the business world in the last decade has been the huge increase in international commerce. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Reporting PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 5 Copyright © 2021 Pearson Education, Inc. 18) Managerial accounting provides information to ________. A) internal decision makers B) outside investors and lenders C) creditors D) taxing authorities Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 19) The field of accounting that focuses on providing information for external decision makers is ________. A) managerial accounting B) financial accounting C) cost accounting D) nonmonetary accounting Answer: B Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 20) The field of accounting that focuses on providing information for internal decision makers is ________. A) managerial accounting B) financial accounting C) nonmonetary accounting D) governmental accounting Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2: Decision Makers: The Users of Accounting Information 6 Copyright © 2021 Pearson Education, Inc. 21) Which of the following users would rely on managerial accounting information for decision-making purposes? A) potential investors B) creditors C) customers D) company managers Answer: D Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2: Decision Makers: The Users of Accounting Information 22) Which of the following is a decision made by an internal user? A) Should we lend money to the business? B) How much money should the business budget for production? C) Should I invest in the business? D) All of the above are correct. Answer: B Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 23) For each user of accounting information, identify if the user would use financial accounting (FA) or managerial accounting (MA). Accounting Information User FA or MA Business manager Creditor Investors Human resources director Internal Revenue Service Auditor Answer: Accounting Information User FA or MA Business manager MA Creditor FA Investors FA Human resources director MA Internal Revenue Service Auditor FA Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2: Decision Makers: The Users of Accounting Information 7 Copyright © 2021 Pearson Education, Inc. 24) For each of the following decisions, identify if it applies to a financial accounting (FA) or a managerial accounting (MA) decision maker. Your answer should be either FA or MA. Include only one choice for each accounting decision. Accounting Decision Decision Maker (FA or MA) Should the business expand to a new location? Is the business profitable? How do actual costs compare to budgeted costs? Should I invest in the business? Answer: Accounting Decision Decision Maker (FA or MA) Should the business expand to a new location? MA Is the business profitable? FA How do actual costs compare to budgeted costs? MA Should I invest in the business? FA Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Application H2: Decision Makers: The Users of Accounting Information 25) Financial analysts perform reviews of companies to ensure compliance to rules and regulations. Answer: FALSE Explanation: Auditors perform reviews of companies to ensure compliance to rules and regulations. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 26) Certified Management Accountants (CMAs) specialize only in financial management knowledge and always work for a single company. Answer: FALSE Explanation: Certified Management Accountants (CMAs) specialize in accounting and financial management knowledge and typically work for a single company. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 8 Copyright © 2021 Pearson Education, Inc. 27) Certified Public Accountants (CPAs) are licensed professional accountants who serve the general public. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 28) ________ are professional accountants who serve the general public, not one particular company. A) Certified public accountants B) Financial managers C) Internal auditors D) Controllers Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 29) Accountants generally work either in public, private or ________ accounting. A) governmental B) personal C) managerial D) state Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 30) ________ typically work in a manufacturing business and help analyze accounting data. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers Answer: B Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 9 Copyright © 2021 Pearson Education, Inc. 31) ________ review financial data and help explain the story behind the numbers. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 32) ________ compile financial statements, interact with auditors, and oversee regulatory reporting. A) Financial analysts B) Cost accountants C) Internal auditors D) Controllers Answer: D Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 10 Copyright © 2021 Pearson Education, Inc. Match the accounting position to the job description in the following four questions. A) Compiles financial statements, interacts with auditors, oversees regulatory reporting B) Serves the general public C) Performs reviews of companies to ensure compliance to rules and regulations D) Specializes in accounting and financial management knowledge 33) Controller Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 34) Certified Management Accountant Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 35) Certified Public Accountant Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters 36) Auditor Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Accounting Matters Answers: 33) A 34) D 35) B 36) C 11 Copyright © 2021 Pearson Education, Inc. Learning Objective F:1-2 1) The Financial Accounting Standards Board is a U.S. governmental agency that oversees the creation and governance of accounting standards. Answer: FALSE Explanation: The Financial Accounting Standards Board is a privately funded organization. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Governing Organizations 2) The SEC is a governmental agency that oversees world-wide financial markets and organizations that set accounting standards. Answer: FALSE Explanation: The SEC is a U.S. governmental agency that oversees the U.S. financial markets. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Governing Organizations 3) Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? A) Financial Accounting Standards Board B) Institute of Management Accountants C) American Institute of Certified Public Accountants D) Securities and Exchange Commission Answer: A Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Governing Organizations 12 Copyright © 2021 Pearson Education, Inc. 4) The Financial Accounting Standards Board (FASB) works with the following groups. Which of these groups was congressionally created? A) Institute of Management Accountants B) Public Company Accounting Oversight Board C) International Accounting Standards Board D) American Institute of CPAs Answer: B Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Governing Organizations 5) List three private groups that work with the Financial Accounting Standards Board (FASB). Answer: Private groups that work with the FASB are the American Institute of CPAs (AICPA), the Institute of Management Accountants (IMA), and the International Accounting Standards Board (IASB). Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Governing Organizations 6) The guidelines for accounting information in the United States are called Generally Accepted Accounting Principles (GAAP). Answer: TRUE Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 7) To be useful, accounting must be relevant and have faithful representation. Answer: TRUE Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 13 Copyright © 2021 Pearson Education, Inc. 8) The primary objective of financial reporting is to ensure that all investment decisions are risk free. Answer: FALSE Explanation: The primary objective of financial reporting is to provide information useful for making investment and lending decisions. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 9) The primary objective of financial reporting is to provide information useful for making investment and lending decisions. Answer: TRUE Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 10) GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________. A) Globally Accepted Accounting Policies B) Government Approved Accounting Principles C) Generally Accredited Accounting Policies D) Generally Accepted Accounting Principles Answer: D Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 11) Regarding generally accepted accounting principles (GAAP), which of the following statements is incorrect? A) GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements. B) The primary objective of financial reporting is to provide information useful for making investment and lending decisions. C) Relevant information is complete, neutral, and free from error. D) GAAP is currently formulated by the Financial Accounting Standards Board. Answer: C Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 14 Copyright © 2021 Pearson Education, Inc. 12) Which of the following statements regarding the primary objective of financial reporting is correct? A) The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. B) Information that is faithfully representative is complete, neutral, and free from error. C) Relevant information ensures that users of the information will make the correct decisions. D) To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission. Answer: B Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 13) The primary objective of financial reporting is to provide information useful for making investment and ________ decisions. A) spending B) financial C) accounting D) lending Answer: D Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 14) ________ allows users of the information to make a decision. A) Relevant information B) Faithful representation C) Neutral information D) Generally Accepted Accounting Principles Answer: A Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 15 Copyright © 2021 Pearson Education, Inc. 15) Information that is faithfully representative is complete, neutral, and ________. A) follows GAAP B) identifies objectives C) free from error D) states basic accounting assumptions Answer: C Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 16) What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently responsible for determining GAAP? Answer: Generally Accepted Accounting Principles (GAAP) are the guidelines for accounting information. GAAP is the main U.S. accounting rule book. The Financial Accounting Standards Board (FASB) is currently responsible for determining GAAP. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 17) What is the primary objective of financial reporting? Answer: The primary objective of financial reporting is to provide information useful for making investment and lending decisions. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Generally Accepted Accounting Principles 18) As per the economic entity assumption, an organization and its owners should be seen as the same entity. Answer: FALSE Explanation: An economic entity is an organization that stands apart as a separate economic entity. Diff: 1 LO: F:1-2 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: The Economic Entity Assumption