CHAPTER 12THE ROLE OF ACCOUNTING INBUSINESSMULTIPLE CHOICE7. The best way to prepare to be an investor is to learn all the _____ that youcan.a. bookkeepingb. accountingc. stock market tipsd. spreadsheet(b; Easy)8. _____, which supply relevant, accurate, timely information in a format thatwill aid them in making decisions, are tailored to the needs of individualmanagers.a. Reportsb. Summariesc. Department updatesd. Data sheets(a; Easy)9. If you were asked to identify “the language of business,” you should reply:_____.a. “Finance”b. “Money”c. “Accounting”d. “Data keeping”(c; Moderate)10. The purpose of accounting is to help _____, who are interested in theactivities of a business because they’re affected by them.a. shareholdersb. fiduciariesc. investorsd. stakeholders(d; Moderate)11. Accountants communicate the meaning of _____ information and workwith individuals and organizations to help them use that information todeal with business problems.CollinsTest Item FileChapter12TheRoleofAccountinginBusinessa. financialb. investmentc. manageriald. bookkeeping(a; Moderate)12. Accountants do all of the following except _____.a. measure business activitiesb. summarize business activitiesc. interpret financial informationd. locate capital(d; Hard)13. To help them operate the business, _____ accounting providesinformation and analysis to decision makers inside the organization.a. financialb. internalc. managementd. executive(c; Hard)14. Working in the field of _____ accounting, John Bates furnishes informationto individuals and groups both inside and outside his organization to helpthem assess the firm’s financial performance.a. comprehensiveb. financialc. advisoryd. management(b; Hard)15. All of the following appear in the financial statements prepared byaccountants except _____.a. marketing budgetsb. income statementsc. balance sheetsd. statements of cash flows(a; Hard)16. _____ are principles for financial reporting established by an independentagency called the Financial Accounting Standards Board.a. Accounting guidelinesb. Government-approved accounting standardsc. Certified rules and regulationsd. Generally accepted accounting principles(d; Hard)2CollinsTest Item FileChapter12TheRoleofAccountinginBusiness17. Which of the following groups is typically not interested in financialaccounting information?a. labor unionsb. creditorsc. suppliersd. all of these groups have some use for financial accounting information(d; Moderate)SCENARIO-BASEDBakersfield, Smith, and Babble LLC is a midsized accounting firm in NewEngland. In order to project an image as a full-service company, eachpartner specializes in a different field of accounting. Bakersfield providesinformation and analysis to business owners in order to help them operatetheir companies. Smith’s job is to furnish information to individuals andgroups both inside and outside organizations to help them assess theirfirms’ financial performances. Babble is primarily responsible for preparingfinancial statements for business owners, managers, and investors andother users, such as creditors and government agencies.18. Smith specializes in corporate accounting.(False; Easy)19. Bakersfield works in management accounting.(True; Moderate)20. Babble spends his time in financial accounting.(True; Hard)21. Given the nature of their firm, none of these accountants would havemuch daily use for GAAP.(False; Hard)22. Government agencies would have little interest in the kind of informationsupplied by this firm.(False; Hard)LEARNING OBJECTIVE23CollinsTest Item FileChapter12TheRoleofAccountinginBusiness1. Understand the functions of the three basicfinancial statements: income statement, balancesheet, and statement of cash flows.TRUE/FALSE23. Your statement of cash flows shows how much cash you have coming inand going out.(True; Easy)24. To find out if you’ve made a profit, you’d prepare a so-called “generalstatement,” which shows revenues and expenses.(False; Easy)25. Expenses are divided into two categories—cost of goods sold andoperating expenses.(True; Easy)26. Its fiscal year is a company’s designated business year.(True; Easy)27. The key to surviving in business is generating cash to keep operating.(True; Easy)28. Breakeven analysis is a method of determining the level of sales at whicha company will have no profit or loss.(True; Easy)29. Its statement of cash flows tells a business only where its cash was spent.(False; Easy)30. Your income statement shows how much cash you have coming in andgoing out.(False; Moderate)31. Your balance sheet shows what your sales and expenses are.(False; Moderate)32. Gross profit is the negative difference between revenues and the cost ofgoods sold.(False; Moderate)33. A company’s balance sheet reports its owner’s equity.(True; Moderate)4CollinsTest Item FileChapter12TheRoleofAccountinginBusiness34. Fixed cost/contribution margin per unit equals a company’s breakevenpoint in units.(True; Moderate)35. Contribution margin per unit is the shortage of revenue per unit overvariable cost per unit.(False; Hard)MULTIPLE CHOICE36. _____ is another word for revenues.a. Bottom lineb. Profitsc. Salesd. Income(c; Easy)37. We read in business publications that net income is often called the_____.a. banker’s best friendb. bottom linec. language of businessd. core line(b; Easy)38. _____ is/are the resources from which a company expects to gain somefuture benefit.a. Liabilitiesb. Owner’s equityc. Assetsd. Capital(c; Easy)39. The debt owed by a business to an outside individual or organization iscalled its _____.a. liabilityb. equityc. asset based. variable outflow5CollinsTest Item FileChapter12TheRoleofAccountinginBusiness(a; Easy)40. Which of the following may cause a company to have cash problems?a. The product in which it has