Title: Accounting and Finance
Course: Question Banks

Q: Accounting allows businesses to communicate information about a company’s financial performance to the following groups of users:
- internal users, external users, and suppliers
- consumers, suppliers, and the government
- internal users, the government, and suppliers
- internal users, external users, and the government
A: internal users, external users, and the government

Q: What sort of information is provided by the accounting process?
- employment data
- scientific data
- marketing data
- financial data
A: financial data

Q: The American Accounting Association refers to accounting as the process of identifying, measuring, and communicating economic information. Accounting is also referred to as:
- Financial Statements
- A Business Plan
- The Language of the IRS
- The Language of Business
A: The Language of Business

Q: Which department at Walmart will not use accounting as a form of business communication:
- Human Resources
- Pharmacy
- Marketing
- Fitting Room
A: Fitting Room

Q: Accounting is used to communicate financial information to both internal audiences and external audiences. Internal users are:
- Suppliers that provide goods
- Contractors that perform work for the business.
- Only people within a business’s accounting and finance departments
- People within the business like production managers
A: People within the business like production managers

Q: One of the reasons that businesses use accounting is it:
- is required by the government
- is easy to understand product information
- is a simple way to track company performance
- supplies information that permits informed judgements and decisions
A: supplies information that permits informed judgements and decisions

Q: Financial accounting is utilized by ________ in order to make investment decisions:
- production employees of the company
- customers
- suppliers
- stockholders and creditors
A: stockholders and creditors

Q: Persons outside the company use its financial information for which of the following decisions?
- Travel to visit the company location.
- Interview the CEO
- To decide whether or not they want to purchase from the company
- Invest in the business
A: Invest in the business

Q: Financial accountants:
- have a primary focus on providing managers within the organization with reports to make good business decisions.
- summarize the company’s production activities in a way that allows managers to make decisions.
- work with government lobbyists to push for more favorable accounting regulations.
- provide information to external entities that allows them to evaluate business performance.
A: provide information to external entities that allows them to evaluate business performance.

Q: ________ provides individuals within an organization with the financial information needed to make good business decisions.
- Financial accounting
- Tax accounting
- Forensic accounting
- Managerial accounting
A: Managerial accounting

Q: Employees of a firm who perform managerial accounting functions are often referred to as:
- Financial Accountants
- Budget Specialists
- Tax accountants
- Cost Accountants
A: Cost Accountants

Q: ________ focuses on a range of topics, from production planning to budgets of raw materials.
- Tax accounting
- Financial accounting
- Forensic accounting
- Managerial accounting
A: Managerial accounting

Q: The accounting equation for a given point in time can be calculated using which financial statement?
- income statement
- statement of cash flows
- profit and loss statement
- balance sheet
A: balance sheet

Q: The accounting equation is:
- liabilities − assets = owner’s equity
- owner’s equity = assets + liabilities
- liabilities = assets + owner’s equity
- assets − liabilities = owner’s equity
A: assets − liabilities = owner’s equity

Q: The accounting equation represents the relationship between assets, liabilities, and:
- the current market value of a business
- the amount for which the business was purchased
- the business’s profit margin
- the owner’s equity of a business
A: the owner’s equity of a business

Q: The ________ provides a snapshot of the company’s financial position at a specific point in time.
- income statement
- statement of cash flows
- profit and loss statement
- balance sheet
A: balance sheet

Q: The balance sheet shows which type of account?
- net sales
- purchases
- dividends
- assets
A: assets

Q: Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. There is an accounting firm located just down the street and Eliza is paying them to do all of her accounting. At the end of the first quarter (three months of business), Eliza has several questions about how things are going. If she wants to understand how much debt the business has right now, then she should look at the ________ that her accountant has prepared.
- the income statement
- the statement of owner’s equity
- profit and loss statement
- the balance sheet
A: the balance sheet

Q: The ________ shows the income and expenses of a company over a period of time.
- balance sheet
- statement of cash flows
- statement of retained earnings
- income statement
A: income statement

Q: Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. At the end of the first quarter (three months of business), Eliza wants to see if she has made a profit so she makes an appointment to meet with her accountant. When she gets to the appointment, her accountant will review which of the following financial statements with Eliza?
- balance sheet
- statement of owner's equity
- statement of retained earnings
- income statement
A: income statement

Q: The ________, sometimes called an earnings statement or profit and loss statement, reports the profitability of a business organization for a stated period of time.
- balance sheet
- statement of retained earnings
- statement of owner’s equity
- income statement
A: income statement

Q: The ________ provides users of the financial statements with a reconciliation of the company’s beginning and ending equity accounts.
- income statement
- statement of cash flows
- Balance sheet
- statement of owner’s equity
A: statement of owner’s equity

Q: Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. There is an accounting firm located just down the street and Eliza is paying them to do all of her accounting. At the end of the first quarter (three months of business), Eliza has several questions about how things are going. If she wants to understand how much money she has put into the business so far, then she should look at the ________ that her accountant has prepared.
- balance sheet
- statement of cash flows
- income statement
- statement of owner’s equity
A: statement of owner’s equity

Q: The net income from the income statement will be used in the:
- statement of cash flows
- balance sheet
- income statement
- statement of retained earnings (or owner’s equity)
A: statement of retained earnings (or owner’s equity)

Q: Although a business has had record sales it is having a hard time paying the bills each month. As a manager you are uncertain why this is occurring and ask the financial accountant to explain this situation to you. When the accountant comes to your office they will bring which of the following financial statements as supporting documentation?
- the income statement
- the statement of owner’s equity
- the balance sheet
- the statement of cash flows
A: the statement of cash flows

Q: Eliza has just opened a new business near campus that is a combination of a laundromat, a nail salon, and a tanning studio. There is an accounting firm located just down the street and Eliza is paying them to do all of her accounting. At the end of the first quarter (three months of business), Eliza has several questions about how things are going. If she wants to understand how much total cash has come into the business this quarter, then she should look at the ________ that her accountant has prepared.
- income statement
- statement of owner’s equity
- balance sheet
- statement of cash flows
A: statement of cash flows

Q: The main purpose of the statement of cash flows is to report on the cash receipts and cash disbursements of an entity:
- at a specific moment in time.
- at the beginning of the year.
- at the beginning of the quarter.
- during an accounting period.
A: during an accounting period.

Q: The four financial statements a company is required to prepare according to GAAP are:
- income statement, corporate tax return, balance sheet, and statement of cash flows.
- income statement, statement of financial position, balance sheet, and statement of cash flows.
- income statement, corporate tax return, statement of financial position, and statement of cash flows
- income statement, balance sheet, statement of cash flows, and statement of owner’s equity.
A: income statement, balance sheet, statement of cash flows, and statement of owner’s equity.

Q: The four accounting statements required by GAAP are prepared in a certain order. What is the order?
- Statement of Owner’s Equity, Balance Sheet, Income Statement, Statement of Cash Flows.
- Statement of Cash Flows, Statement of Owner’s Equity, Balance Sheet, Income Statement.
- Statement of Owner’s Equity, Income Statement, Statement of Cash Flows, Balance Sheet
- Income Statement, Statement of Owner’s Equity, Balance Sheet, Statement of Cash Flows.
A: Income Statement, Statement of Owner’s Equity, Balance Sheet, Statement of Cash Flows.

Q: The four accounting statements are said to be inter-connected because:
- GAAP rules must be followed.
- information on all reports are the same.
- they all use the exact same data.
- details for account balances on one report, may be found on one of the other reports.
A: details for account balances on one report, may be found on one of the other reports.

Q: Which of these financial statements explains the changes in a business during a period of time?
- Balance sheet, income statement
- Statement of owner’s equity, balance sheet
- Balance sheet, statement of retained earnings
- Income statement, statement of owner’s equity
A: Income statement, statement of owner’s equity

Q: When a business owner is asked how the business is doing and she replies, “We are breaking even” what does this actually mean?
- The revenue earned for a period is less than costs incurred.
- The revenue earned for a period is more than costs incurred
- The revenue earned for a period is more than the prior period.
- The revenue earned and costs incurred for a period are equal.
A: The revenue earned and costs incurred for a period are equal.

Q: The break-even point for a business is:
- the point where costs exceed revenue.
- the point where profitability is achieved.
- the point when a business meets their profitability goals.
- the point where income is equal to expenses.
A: the point where income is equal to expenses.

Q: Break-even determines the point when ________ covers fixed expenses.
- Variable Costs
- Salary Expense
- Fixed costs
- Contribution Margin
A: Contribution Margin

Q: In a manufacturing operation a variable cost necessary to produce the finished product includes:
- rent.
- electricity.
- administrative wages
- parts.
A: parts.

Q: In a manufacturing operation fixed costs necessary to keep the operation going include:
- Production Labor
- Parts
- Distribution costs
- Rent
A: Rent

Q: Ingredients consumed in the manufacture of packaged food products are considered:
- Liabilities
- Fixed Costs
- Assets
- Variable Cost
A: Variable Cost

Q: The formula for calculating the break-even point is:
- revenue minus expenses per unit.
- the point where profitability is achieved.
- fixed costs plus variable costs.
- fixed costs divided by the contribution margin per unit.
A: fixed costs divided by the contribution margin per unit.

Q: Given fixed costs of $100,000 and contribution margin of $20 per unit. How many units are needed to break even?
- 1,000
- 800
- $3,000
- 5000
A: 5000

Q: What is the breakeven sales revenue in USD when fixed costs are $80,000 and contribution margin is $30,000?
- $50,00
- $80,000
- $100,000
- $110,000
A: $110,000

Q: The Sabian company manufactures cymbals and sells them to colleges for marching bands. This last quarter, Sabian sold $500,000 with variable costs of $200,000 and fixed costs of $150,000. What was Sabian’s contribution margin?
- $350,000
- $300,000
- $200,000
- $150,000
A: $150,000

Q: You have a small business selling hand-knit scarves through the internet. You sell each of your scarves for $35. Your variable expenses are as follows for one scarf:

Item | Amount
Yarn/Materials | $15
Packaging | $3
Shipping | $5

What is your contribution margin for selling one scarf?
- $20
- $17
- $15
- $12
A: $12

Q: The No Doze Cafe coffee shop sells 50 different types of coffee to its patrons. It costs $4 for a cup of coffee. Each day it sells on average 500 cups of coffee. On the weekends it sells closer to 1000 cups of coffee. Here is a breakdown of the shop’s expenses per cup of coffee:

Variable Costs
Item | Amount
Coffee/Water | $1.50
Paper Cup | $0.30
Sweetener | $0.20

Fixed Costs
Item | Amount
Labor | $100/day per employee
Store Space Rent | $800/month

What is the contribution margin for the shop selling one cup of coffee on an average day?
- $2.50
- $1.92
- $1.75
- $2.00
A: $2.00

Q: The formula for contribution margin ratio is:
- fixed costs divided by number of units.
- fixed costs minus variable costs.
- fixed costs plus variable costs.
- contribution margin per unit divided by sales price per unit.
A: contribution margin per unit divided by sales price per unit.

Q: Given sales revenue of $80,000 and contribution margin of $60,000 what are the variable costs?
- $140,000
- $60,000
- $50,000
- $20,000
A: $20,000

Q: When 10,000 units are produced and the sales price is $60 per unit, what are the variable costs if the contribution margin is $20?
- $200,000
- $40,000
- $250,000
- $400,000
A: $400,000

Q: Given sales revenue of $600,000 and break-even sales of $500,000 what is the Margin of Safety?
- $500,000
- $1,100,000
- $700,000
- $100,000
A: $100,000

Q: Given sales revenue of $500,000, variable costs of $200,000, and fixed expense of $50,000 what is the Margin of Safety?
- $50,000
- $100,000
- $350,000
- $250,000
A: $250,000

Q: Tom’s Hardware has a sales revenue of $150,000 and it’s break-even sales are $120,000. Therefore, the margin of safety will be:
- $270,000
- $120,000
- $500,000
- $30,000
A: $30,000

Q: ________ measures a company’s ability to pay its debts, while ________ measures the company’s ability to earn a profit.
- solvency test: profitability tests
- cash flow ratios: owner’s equity
- cash flow ratios: profitability tests
- liquidity ratios: profitability tests
A: liquidity ratios: profitability tests

Q: Which of the following statements are true about the contribution margin ratio?
- It is calculated as profit divided by sales.
- A higher contribution margin ratio indicates a more profitable company.
- It is the primary factor investors use to evaluate companies.
- It shows how much profit a company will make on each dollar of sales.
A: It shows how much profit a company will make on each dollar of sales.

Q: The acid-test (quick) ratio is different from the current ratio in that it:
- measures liquidity.
- includes inventories.
- measures net profit.
- emphasizes assets that are quickly and reliably turned into cash.
A: emphasizes assets that are quickly and reliably turned into cash.

Q: The Golden Braid Bookstore currently has $340,000 in cash, $280,000 in inventory, and $40,000 in accounts receivable. The company also has $65,000 in accounts payable, and $15,000 in other current liabilities. What is its current (or working capital) ratio?
- 4.75 :1
- 4.25:1
- 5.75:1
- 8.25 :1
A: 8.25 :1

Q: Act II Costumes currently has $120,000 in cash, $340,000 in inventory, and $20,000 in accounts receivable. The company also has $20,000 in accounts payable, and $20,000 in other current liabilities. What is its current (or working capital) ratio?
- 4.75: 1
- 9: 1
- 7:1
- 12: 1
A: 12: 1

Q: Which report from The KSY Manufacturing Company will have the necessary information to calculate its Current Ratio?
- Operating Statement (Profit and Loss)
- Statement of Cash Flows
- Statement of Retained Earnings
- Balance Sheet
A: Balance Sheet

Q: The Golden Braid Bookstore currently has $340,000 in cash, $280,000 in inventory, and $40,000 in accounts receivable. The company also has $65,000 in accounts payable, and $15,000 in other current liabilities. What is its quick ratio?
- 8.25: 1
- 4.25: 1
- 5.75: 1
- 4.75: 1
A: 4.75: 1

Q: Act II Costumes currently has $120,000 in cash, $340,000 in inventory, and $20,000 in accounts receivable. The company also has $20,000 in accounts payable, and $20,000 in other current liabilities. What is its quick ratio?
- 12: 1
- 9: 1
- 5.5: 1
- 3.5: 1
A: 3.5: 1

Q: Parker Lane Cafe currently has $160,000 in cash, $380,000 in inventory, and $40,000 in accounts receivable. The company also has $40,000 in accounts payable, and $10,000 in other current liabilities. What is its quick ratio?
- 3.2: 1
- 11.6: 1
- 7.5: 1
- 4: 1
A: 4: 1

Q: Lid On It hat shop had $1.55 million in annual sales. During the same period its cost of goods sold was $620,000 and held average inventory of $100,000. What is the inventory turnover?
- 15.5
- 10.0
- 5.7
- 6.2
A: 6.2

Q: An inventory turn ratio of 25 means a company’s average quantity of goods in inventory sold within how many days?
- 25
- 5.2
- 13.3
- 14.6
A: 14.6

Q: Extotech has sales of $50 million, cost of goods sold for the same period of $15 million, and average inventory of $250,000. What is Exotech’s inventory turnover?
- 200
- 20
- 150
- 60
A: 60

Q: Accurate reporting is critical to the accounting profession because many important financial and business decisions are based on financial reports. As such, unethical accounting practices can result in:
- accurate financial reports.
- professional training.
- there are no consequences from unethical accounting practices.
- civil lawsuits.
A: civil lawsuits.

Q: The cost to taxpayers is estimated at billions of dollars for:
- bad pricing.
- wrong inventory counts.
- unethical costing strategies.
- unethical practices in financial reporting.
A: unethical practices in financial reporting.

Q: The voluntary organization that provides standards for auditor independence, and integrity and objectivity in the accounting profession is:
- SOX.
- FASB.
- AAA.
- AICPA.
A: AICPA.

Q: The purpose of this legislation is to reduce unethical corporate behavior, protect investors from the possibility of fraudulent accounting activities by corporations, and decrease the likelihood of future corporate scandals. It is the:
- Securities and Exchange Commission (SEC).
- Generally Accepted Accounting Principles (GAAP).
- Clayton Act
- Sarbanes-Oxley Act (SOX).
A: Sarbanes-Oxley Act (SOX).

Q: This legislative bill contains 11 sections including more severe penalties for fraudulent financial reporting, and increased requirements for transparency. The bill is:
- GAAP.
- CPA license.
- Clayton Act
- Sarbanes Oxley (SOX).
A: Sarbanes Oxley (SOX).

Q: Employees who come forth with incriminating information are protected in the Sarbanes Oxley (SOX) by which provision?
- Transparency
- Section 302
- Section 508
- Whistleblower protections
A: Whistleblower protections