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1
The primary purpose of accounting is to determine whether the business entity is profitable or unprofitable in its operations.
A)True
B)False
2
Costs, prices, sales volume, profit, and return on investment, are all accounting measurements.
A)True
B)False
3
The correct order of the accounting process is:

Accounting process → Accounting information → Decision makers → Economic Activities →

A)True
B)False
4
The types of accounting information are limited.
A)True
B)False
5
Accountants use the term financial position to describe an entity's activities during the year.
A)True
B)False
6
Financial accounting information is designed primarily to assist investors and creditors in deciding where to place their scarce investment resources.
A)True
B)False
7
Management accounting specifically involves the development and interpretation of accounting information intended specifically to aid management in acquiring investment resources.
A)True
B)False
8
The most challenging aspect of tax accounting is in the preparation of the many forms required for an entity's tax return.
A)True
B)False
9
Laws and regulations governing taxation are often the same as those underlying the preparation of financial and management accounting information.
A)True
B)False
10
An accounting system consists of personnel, procedures, devices, and records used by an organization to develop accounting information and to communicate this information to decision makers.
A)True
B)False
11
The basic purpose of the accounting system is to meet the Internal Revenue requirements for information as efficiently as possible.
A)True
B)False
12
The cost of producing the types of accounting reports required by law is always cost-effective.
A)True
B)False
13
In an accounting information system, the financial information provided deals basically with profitability, financial position, and cash flow.
A)True
B)False
14
The basic functions of an accounting system are to (1) interpret and record the effects of business transactions, (2) classify the effects of similar transactions in a manner that permits determination of the various totals and subtotals, and (3) summarize and communicate the information contained in the system to decision makers.
A)True
B)False
15
Internal control is a process designed to provide reasonable assurance that the organization produces reliable financial reports and complies with applicable laws and regulations.
A)True
B)False
16
The major purpose of the internal control structure is to detect fraud.
A)True
B)False
17
The foundation for four of the five components of internal control is the control environment.
A)True
B)False
18
External users of financial accounting information are the same users of management accounting information.
A)True
B)False
19
Return of investment and return on investment refer to the same thing-the amount returned at the end of the investment period.
A)True
B)False
20
If you invest $75,000 and receive $78,500 at the end of the investment period, the return on your investment is 4.7 percent.
A)True
B)False
21
A company's cash flow prospects are made up of return of investment and return on investment.
A)True
B)False
22
The second objective of external financial reporting is to provide general information useful in making investment and credit decisions.
A)True
B)False
23
The primary financial statements are the income statement and the balance sheet.
A)True
B)False
24
One of the three financial statements that cover a specific period of time is the balance sheet.
A)True
B)False
25
Statement of financial position and income statement are synonymous terms.
A)True
B)False
26
Externally reported financial information and financial statements are primarily historical in nature.
A)True
B)False
27
Externally reported financial statements are very precise in the information they provide.
A)True
B)False
28
Management accounting is the preparation and use of accounting information systems to achieve the organization's objectives by supporting decision makers outside the enterprise.
A)True
B)False
29
Plant managers are internal users of accounting information systems.
A)True
B)False
30
The management accounting information created and used primarily by internal users is intended, above all, for planning and control decisions.
A)True
B)False
31
One of the specific purposes of management accounting is to provide information useful to help the enterprise achieve its goals, objectives, and mission.
A)True
B)False
32
Management accounting is similar to financial accounting in that it is oriented toward past events.
A)True
B)False
33
The term integrity refers to the qualities of being unimpaired, honest, and sincere.
A)True
B)False
34
Standards adopted and used as a guide in measuring, recording, and reporting the financial affairs and activities of a business are known as accounting concepts.
A)True
B)False
35
The primary purpose of the conceptual framework for financial reporting is to provide guidance to the FASB in developing new accounting standards.
A)True
B)False
36
Today, the most authoritative source of generally accepted accounting principles is the Financial Accounting Standards Board (FASB).
A)True
B)False
37
The FASB is a governmental agency.
A)True
B)False
38
To date, there has been no attempt to establish uniformity among the accounting principles used around the world.
A)True
B)False
39
All countries with stock exchange listing requirements (or national securities legislation) permit foreign companies that issue securities in those countries to prepare their consolidated financial statements using International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board.
A)True
B)False
40
The Securities and Exchange Commission is a governmental agency with the legal power to establish accounting principles and financial reporting requirements for publicly owned corporations.
A)True
B)False
41
The Public Company Accounting Oversight Board (PCAOB) has limited, but specific, powers in overseeing the accounting profession.
A)True
B)False
42
Uncovering fraud is the primary purpose of an audit.
A)True
B)False
43
The Sarbanes-Oxley Act was passed in response to the reporting problems associated with, among other companies, Enron.
A)True
B)False
44
Accountants and auditors use the term fair in describing financial statements that may be misleading in their completeness and reliability.
A)True
B)False
45
The American Institute of Certified Public Accountants licenses certified public accountants.
A)True
B)False
46
Membership in the Institute of Internal Auditors (IIA) is made up primarily of accounting educators.
A)True
B)False
47
Whichever career in accounting you choose, public, management, financial forecasting, cost accounting, internal auditing, government accounting, or accounting education, it is your obligation as a professional to serve the public's best interest, even at the sacrifice of personal advantage.
A)True
B)False
48
The American Institute of Certified Public Accountants issues the Certificate of Management Accounting (CMA).
A)True
B)False
49
The code of ethics of the Institute of Management Accountants (IMA) includes the requirements of competency, confidentiality, integrity, and subjectivity.
A)True
B)False
50
The phrase "exercise sensitive professional and moral judgment in activities" is included in Article III Integrity of the AICPA Code of Professional Conduct.
A)True
B)False
51
The professional code of ethics for management accountants (CMA's) is similar to that for financial accountants (CPA's).
A)True
B)False
52
The American Institute of Public Accountants (AICPA) grants and issues CPA certificates.
A)True
B)False
53
The CPA examination is conducted at specific locations twice a year in the state in which the CPA candidate resides.
A)True
B)False
54
Financial forecasting is a major part of the responsibilities of a public accountant.
A)True
B)False
55
The General Accountability Office (GAO) audits the government.
A)True
B)False
56
The "watchdog" of financial reporting is a term often used to describe the IRS.
A)True
B)False
57
The clerical side of accounting is called bookkeeping.
A)True
B)False





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