Distinguish financial accounting and managerial accounting

Question

Question 1: The primary difference between "Financial Accounting" and "Managerial Accounting" is that Managerial Accounting gives an historical perspective.

• True
• False

Question 2: Accounting has frequently been referred to as the "language of business" .

• True
• False

Question 3: "Current", "Near-term" and "short-term" all mean the same thing (are synonomous. in accounting terminology.

• True
• False

Question 4: "Risk" is generally thought to be the big trade-off in maximizing profits/return.

• True
• False

Question 5: "Cash" basis accounting is the best method for matching revenue with expenses.

• True
• False

Question 6: An intangible asset can have physical form i.e. can be seen and touched.

• True
• False

Question 7: Goodwill is a Tangible Asset.

• True
• False

Question 8: "Current" Assets means those which are convertible into Cash within 6 months..

• True
• False

Question 9: Payments make Liability accounts go down.

• True
• False

Question 10: The "Time Value of Money" concept basically states that a dollar today is worth less than a dollar in the future.

• True
• False

Question 11: GAAP prepared Financial Statements require that they be accompanied by Notes.

• True
• False

Question 12: "GAAP" stands for "Generally Accepted Auditing Principles"..

• True
• False

Question 13: Dividends paid by a firm make its Retained Earnings account go up.

• True
• False

Question 14: A payment that is exactly the same amount and made at equally spaced intervals of time is called an "Annuity".

• True
• False

Question 15: A Capital Budget usually involves the analysis of short-term projects.

• True
• False

Question 16: Capital Stock plus Paid-in-Capital plus Retained Earnings make up the Stockholders Equity section on a Balance Sheet.

• True
• False

Question 17: Under "Accrual" accounting, expenses are recognized when monies are paid out.

• True
• False

Question 18: Cost of Goods Sold is used in determining Gross profit.

• True
• False

Question 19: A Discounted Cash Flow analysis considers the time value of money in evaluating a project.

• True
• False

Question 20: "Profitability" and "Viability" are two main goals of financial management.

• True
• False

Question 21: The primary function of a Management Control System ("MCS". is to detect fraud.

• True
• False

Question 22: The difference between the actual and budgeted amounts is known as a "Variance."

• True
• False

Question 23: The rule of "Full Disclosure" requires financial reports to disclose any information needed to assure a fair presentation.

• True
• False

Question 24: When an outside accountant "certifies" i.e. gives a "clean opinion" on a company's financial statements, he is telling the reader that the statements are free of any errors.

• True
• False

Question 25: Public companies are not required to report their Earnings Per Share ("EPS")

• True
• False

Question 26: A firm utilizing 'Operating leverage' generally incurs higher fixed costs.

• True
• False

Question 27: Contingent liabilities need not be mentioned or referred to in a company's audited financial statements.

• True
• False

Question 28: Maximizing liquidity and solvency is a good financial strategy.

• True
• False

Question 29: Leasing is considered another source of Financing.

• True
• False

Question 30: It is okay to co-mingle the assets of one entity with another as long as they have the same ownership.

• True
• False

Question 31:  The mixture of debt and equity used by the firm to finance its operations is called:

• working capital management.
• financial depreciation.
• agency cost analysis.
• capital budgeting.
• capital structure.

Question 32: The financial statement showing a firm's earnings over a period of time is the:

• Income statement.
• Balance sheet.
• Statement of cash flows.
• Tax reconciliation statement.
• Shareholders' equity sheet.

Question 33: The financial statement showing a firm's accounting value on a particular date is the:

• Income statement.
• Balance sheet.
• Statement of cash flows.
• Tax reconciliation statement.
• Shareholders' equity sheet.

Question 34: A current asset is:

• Any item currently owned by the firm.
• An item that the firm expects to own within the next year.
• An item owned by the firm that it expects to convert into cash within the next 12 months.
• Property, Plant and Equipment
• The market value of all the items currently owned by the firm.

Question 35: A company's financial "viability" is measured by:

• Profit and Loss
• Hurdle Rate
• Dividend Policy
• Liquidity and Solvency
• Ability to pay taxes

Question 36: Balance Sheet Assets __________.
I -are always equal to total liabilities minus shareholders' equity
II -are always equal to the firm's total liabilities plus equity
III -are listed in order of increasing liquidity from top to bottom

• I only
• II only
• III only
• I and III only
• II and III only

Question 37: Under GAAP, balance sheet assets are __________.

• carried on the books at historical cost
• only carried on the books if they are relatively liquid
• carried on the books at market value
• listed in order of increasing relative liquidity from top to bottum
• carried at the larger of historic cost or market value

Question 38: The following are considered Assets of a firm or entity:

I -Accounts Receivable
II -Accounts Payable
III -Inventory
IV -Equipment
V -Interest

• II, III, and V
• I, III, and IV
• I, II, and III
• All of the above
• None of the above

Question 39: The following is considered the "Common Denominator" of all financial statements:

• Total assets
• Money or currency (dollars in the US.)
• Stockholder's Equity
• Trade Credit
• None of the above

Question 40: A firm has Current Assets of $7,500, Total Assets of $12,500, Current Liabilities of $4,500, and Total Liabilities of $6,500.

The firm's Net Working Capital is:

• $3,000
• $4,500
• $6,000
• $7,500
• $9,500

Question 41: The Owner's or Stockholder's Equity is:

• $3,000
• $4,500
• $6,000
• $7,500
• None of the above

Question 42: Its "Current Ratio" is:

• 0.60 to 1
• 1.67 to 1
• 1.15 to 1
• 2.00 to 1
• None of the above.

Question 43: The following are areas of "Activities" found on a Statement of Cash Flows:

• Investing Activities
• Operating Activities
• Financing Activities
• All of the above
• None of the above

Question 44: If a firm's Contribution Margin is $2,750 and its Revenue is $5,000, then its. Variable Costs must be:

• $1,250
• $2,250
• $2,750
• $4,500
• $5,250

Question 45: The following are considered examples of a firm's Expense Accounts:

I -Interest Paid
II -Interest Earned
III -Notes Payable
IV -Depreciation
V -Wages

• I and V
• II, III, and IV
• I, IV and V
• I, III, and V
• All of the above

Question 46: The two major types of Leverage are:

I -Operating
II -Floating
III -Financial
IV -Benchmark
V -Liquid

• I and II
• II and IV
• I and III
• III and IV
• I and IV

Question 47: Machine A cost $15,000. Machine B cost $35,000. They both produce the same part that sells for $1 each. The variable costs to produce the part are $.75 (seventy-five cents. each for Machine A and $.50 (fifty cents) each for Machine B.)

What volume is required for Machine A to break even:

• 50,000 units
• 60,000 units
• 70,000 units
• 80,000 units
• 90,000 units

Question 48: Machine A cost $15,000. Machine B cost $35,000. They both produce the same part that sells for $1 each. The variable costs to produce the part are $.75 (seventy-five cents) each for Machine A and $.50 (fifty cents. each for Machine B.

At what volume do both machines generate an equal profit:

• 50,000 units
• 60,000 units
• 70,000 units
• 80,000 units
• 90,000 units

Question 49: Machine A cost $15,000. Machine B cost $35,000. They both produce the same part that sells for $1 each. The variable costs to produce the part are $.75 (seventy-five cents. each for Machine A and $.50 (fifty cents) each for Machine B)

What is the "Contribution Margin" per unit for Machine B:

• $.25
• $.50
• $.75
• $5,000
• None of the above

Question 50: Gross Profit on Sales (%. i.e. Gross Profit/Sales is an example of what ratio:)

• Liquidity
• Asset Management
• Debt (Leverage)(Solvency)
• Profitability
• Market Value

Question 51: Which one of the following is not usually regarded as a source of "Capital":

• Venture Capitalists
• Private Placement or Equity firms
• The Stock market
• Commercial Banks
• The Bond market

Question 52: A company orders $1,000 of inventory in November to be delivered in December. The accounting entry to record this transaction on the books in November would be as follows:

• Increase Assets (Inventory. and decrease Cash
• Increase Assets (Inventory. and increase Liabilities (Accounts Payable)
• Increase Cost of Sales and increase Liabiliti
• Increase Expenses and increase Revenues
• No accounting entry is required to record this transaction in the month of November

Question 53: All of the following, except one, can be found in the "Operating Activities" section of a Cash Flow Statement. Please identify it:

• Depreciation
• Decrease in Accounts Receivable
• Increase in Accounts Payable
• Sale of fixed Assets
• Increase in Inventory

Question 54: Please identify one of the following as not normally found in "Notes to Financial Statements": The company's significant accounting policies.

• Leasing commitments
• Contingent Liabilites
• Owners Compensation
• Goodwill Impairment (if any)

Question 55:  Which of the following is generally regarded as a potential reader or user of a company's Financial Statements:

• Stockholders i.e. shareholders, investors
• Competitors
• Customers and Vendors (Suppliers)
• Employees and Management
• All of the above

Question 56: A good system of Internal Control is designed to:

• Insure the efficiency and effectiveness of operations
• Compliance with all laws, rules and regulations
• Reliable reporting of financial results
• Safeguard the assets of the firm
• All of the above

Question 57: An independent auditor's Opinion can take one of the following forms:

• Unqualified or "clean"
• Qualified
• Adverse
• None of the above
• All of the above (a thru c)

Question 58: The following are considered to be elements required in a good system of Internal control:

1 -Having an 'audit' trail
2 -Adequate documentation
3 -Employee Rotation
4 -Proper authorization
5 -All of the above

• 1, 2 and 3
• 1, 2 and 4
• 2, 3 and 4
• 1, 3 and 4
• 5