Practice Test: Accounting

Accounting involves the _____ of the financial activities for firms.

• A. delegating
• B. summarizing
• C. creation
• D. empowering
• E. planning

Accounting provides a framework for looking at:

• A. past performance
• B. current financial health
• C. possible future performance
• D. financial performances of different firms
• E. all of the above

To ensure accuracy and consistency in the way financial information is reported, accountants follow rules known as:

• A. accounting rules and principles
• B. principled accounting procedures
• C. comparable accounting standards
• D. generally accepted accounting principles
• E. financial accounting standards

The Financial Accounting Standards Board (FASB) is a:

• A. private organization that is responsible for establishing financial accounting standards in the United States
• B. federal government agency that is responsible for establishing financial accounting standards in the United States
• C. United Nations organization that is responsible for establishing financial accounting standards globally
• D. federal government agency that is responsible for establishing managerial accounting standards for NAFTA members
• E. federal government agency that mediates disputes between accountants and the companies they work for

The Sarbanes-Oxley Act:

• A. set national requirements for becoming a practicing CPA
• B. restricts the types of nonaudit services auditors can provide audit clients
• C. dealt with accounting issues relevant to NAFTA members
• D. mandated the use of international accounting standards
• E. made fraudulent financial reporting illegal

_____ is the system used to record a firm's financial transactions in a routine and clerical process.

• A. Accounting
• B. Record keeping
• C. Bookkeeping
• D. Auditing
• E. Financial management

Things of value owned by a firm are called its:

• A. intangibles
• B. owners' equity
• C. tangibles
• D. assets
• E. liabilities

Which of the following is an example of an intangible asset for a manufacturer of padlocks?

• A. money owed to them by a do-it-yourself superstore chain
• B. a patent on titanium lock mechanism
• C. a machine for forming the locks out of sheet metal
• D. a warehouse for storing locks
• E. an office for company CEO

Which of the following is an example of a liability that might be owned by an antique mall?

• A. an expensive Chinese urn with a small crack
• B. the sales prices paid by customers
• C. promotional signs
• D. money owed to utility companies
• E. accounting and inventory software

Another term for owners' equity is:

• A. assets
• B. liabilities
• C. net worth
• D. gross worth
• E. gross sales