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| 1 | |
A balance sheet is used to report the activities involving assets, liabilities, and stockholders' equity over a specific time period. |
| | A) | True |
| | B) | False |
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| 2 | |
The income statement is used to report the results of operations over a specific time period. |
| | A) | True |
| | B) | False |
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| 3 | |
The statement of retained earnings is used to report the changes in retained earnings attributed to net income (or net loss) and dividends. |
| | A) | True |
| | B) | False |
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| 4 | |
The statement of cash flows is used to report the inflows and outflows of cash during an accounting period in the categories of operating, investing, and financing activities. |
| | A) | True |
| | B) | False |
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| 5 | |
The four basic financial statements are only prepared for annual accounting periods. |
| | A) | True |
| | B) | False |
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| 6 | |
The heading of every financial statement must include who, what, and when. |
| | A) | True |
| | B) | False |
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| 7 | |
The format of the balance sheet reflects the basic accounting equation. |
| | A) | True |
| | B) | False |
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| 8 | |
The income statement is a report of the basic financial position of the entity. |
| | A) | True |
| | B) | False |
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| 9 | |
The estimated market value of the resources (assets) that the company owns is reported on the balance sheet. |
| | A) | True |
| | B) | False |
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| 10 | |
Liabilities are a source of economic resources. |
| | A) | True |
| | B) | False |
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| 11 | |
Stockholders' equity is a source of economic resources. |
| | A) | True |
| | B) | False |
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| 12 | |
Only revenues that have been received in the form of cash are reported on the income statement. |
| | A) | True |
| | B) | False |
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| 13 | |
All expenses reported on the income statement involve an outflow of cash during the time period covered by the statement. |
| | A) | True |
| | B) | False |
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| 14 | |
If total expenses exceed total revenues, a net loss is reported for the accounting period. |
| | A) | True |
| | B) | False |
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| 15 | |
Net income (or net loss) appears on the income statement and the statement of retained earnings. |
| | A) | True |
| | B) | False |
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| 16 | |
The statement of retained earnings is of primary importance to creditors but of little importance to investors. |
| | A) | True |
| | B) | False |
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| 17 | |
The statement of cash flows covers a specific period of time. |
| | A) | True |
| | B) | False |
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| 18 | |
Cash flows related to the acquisition of productive assets are called financing activities. |
| | A) | True |
| | B) | False |
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| 19 | |
The total amount of cash outflow used to pay suppliers and employees is shown as an operating activity on the statement of cash flows. |
| | A) | True |
| | B) | False |
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| 20 | |
The statement of cash flows is of little interest to investors. |
| | A) | True |
| | B) | False |
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| 21 | |
Supplemental information without which the financial statements cannot be fully understood is provided by footnotes to the statements. |
| | A) | True |
| | B) | False |
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| 22 | |
Financial statements of other companies provide useful information to purchasing managers. |
| | A) | True |
| | B) | False |
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| 23 | |
Financial statements of a customer provide useful information to credit managers. |
| | A) | True |
| | B) | False |
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| 24 | |
Financial statements of a company provide useful information for its human resource managers. |
| | A) | True |
| | B) | False |
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| 25 | |
The price/earnings ratio is determined by dividing net income by the market price. |
| | A) | True |
| | B) | False |
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| 26 | |
If the market price is $1,500,000 and the P/E ratio is 12, the net income for the accounting period was $125,000. |
| | A) | True |
| | B) | False |
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| 27 | |
The measurement rules used to develop the information in financial statements are called generally accepted accounting procedures. |
| | A) | True |
| | B) | False |
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| 28 | |
The responsibility for establishing generally accepted accounting principles (GAAP) lies with the Financial Accounting Standards Board (FASB). |
| | A) | True |
| | B) | False |
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| 29 | |
Generally accepted accounting principles (GAAP) are standardized among the various countries of the world. |
| | A) | True |
| | B) | False |
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| 30 | |
Management prepares the audit report. |
| | A) | True |
| | B) | False |
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| 31 | |
An audit report can only be issued by a certified public accountant (CPA). |
| | A) | True |
| | B) | False |
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| 32 | |
A misleading financial statement is always clear evidence of fraud. |
| | A) | True |
| | B) | False |
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| 33 | |
The American Institute of Certified Public Accountants (AICPA) requires adherence to a professional code of ethics. |
| | A) | True |
| | B) | False |
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| 34 | |
In cases of fraud, only the managers of the company committing fraud are held responsible. |
| | A) | True |
| | B) | False |
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