Page 464 - Introduction to Business

438 PART 4 Accounting

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True/False Questions b. increase the wealth of the firm’s owners,
Please indicate if the following statements are true or that is, investors.
false: c. reduce dependence on foreign imports.
d. provide job security to all employees.
1. Accounting is called the language of
e. develop multinational operations.
business because accounting provides the
information that people need to make 2. The financial statements do not include
effective business decisions. a(n)
2. The balance sheet is also referred to as the a. statement of retained expenses and
statement of operating results or the future cash flows.
statement of earnings. b. income statement.
c. statement of retained earnings.
3. A fiscal year is an accounting period of 12
d. balance sheet.
months, which may or may not end on
e. statement of cash flows.
December 31.
3. _____ is the biggest expense of
4. External audits must be conducted by
merchandising firms such as Sears, Best
either independent Certified Public
Buy, and Kroger.
Accountants (CPAs) or internal auditors.
a. Utility expense
5. The audit trail is the connection between a
b. Depreciation expense
source document (e.g., a sales invoice) and
c. Cost of goods sold
the transaction’s ultimate disposition on the
d. Income tax expense
financial statements.
e. Advertising
6. Over half of McDonald’s Corporation’s
4. All audits are characterized by a common
restaurants are outside the United States.
set of steps. These steps do not include
7. When a U.S. corporation owns 25 percent or
a. arrive at an opinion.
more of the voting stock of a foreign
b. plan the audit.
company, a parent-subsidiary relationship
c. obtain and evaluate evidence.
exists, and the parent company is usually
d. investigate competitor pricing.
required to prepare consolidated financial
e. communicate results.
statements.
5. The negative effects of computerization
8. Since organizations responsible for creating
from an auditing standpoint do not include
accounting and auditing standards
maintain websites, the Web now presents a a. the existence of data in computer-
convenient way to keep up-to-date on readable form only.
technical developments. b. an increased visibility of transaction
processing.
9. The Sarbanes-Oxley Act established the
c. a diminished audit trail.
Public Company Accounting Oversight
d. extreme consequences of program
Board.
errors.
10. The American Institute of CPAs is the
e. the inability of the computer to exercise
premier national professional association
logic.
for public accounting in the United States.
6. The _____ is the currency in which the
Multiple-Choice Questions financial statements of a foreign subsidiary
are denominated.
Choose the best answer.
a. functional currency
1. The primary goal of a firm is to
b. currency of books and records
a. increase tax revenues to the government.
c. reporting currency
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