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Identifying accounting terms Part C
Section A. Select the one term in Column I that best fits each definition in column II. Write the number identifying your choice.
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1. accounting |
0. A business owned by one person………. |
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2. accounting records |
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1. The determination and control of costs of a |
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3. accounting system |
business enterprise. |
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4. auditing |
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2. The independent reviewing and issuing of an |
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5. auditor |
opinion on the reliability of accounting records |
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6.capital stock
7.corporation
8.cost accounting
9.ethics
10.financial accounting
11.management advisory services
12.managerial accounting
13.partnership
14.personal financial planning
15.proprietorship
16.share of stock
17.stockholder
18.tax accounting
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3.An organization with the legal rights of a person and which may be owned be many persons ……………
4.An owner of one or more shares of a corporation ……………
5.Assisting individuals in managing their personal investments ……………
6.Each unit of ownership in a corporation
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7.Management advice provided to an organization by a public accountant……….
8.The recording of a business’ financial activities and the periodic preparation of financial reports
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9.Organized summaries of a business’ financial activities ……………
10.Planning, recording, analyzing, and interpreting financial information …………
11.A person who examines the records which support the financial records of a business to assure that generally accepted accounting principles (GAAP) are being followed
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12.A business in which two or more persons combine their assets and skills…………….
13.The analysis, measurement, and interpretation of financial accounting information ……………
14.The preparation of tax returns as well as tax planning ……………
15.The principles of right and wrong that guide an individual in making decisions …………
16.Total shares of ownership in a corporation
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17.A planned process for providing financial
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information that will be useful to management
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Analyzing the accounting framework and concepts
Section B. Place a check mark in the proper Answers column to show whether each of the following statements is true or false.
Answers
Tr F ue alse
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CPA is an abbreviation for Certified Private Accountants |
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A person’s ethics are developed from relationships with |
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individuals that influence the person’s life |
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An action is ethical if it is legal and does not violate company |
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or professional standards |
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The first step in analyzing an ethical situation is to determine |
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if the action violates company policies or standards |
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Financial accounting provides financial reports primarily for |
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use by persons external to the organization |
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A private accountant hired by a large business to assist the |
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public accountants and audit the operational efficiency of the |
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business is referred to as an internal auditor |
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One advantage of a partnership is that additional stock may be |
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issued to provide funds for future growth |
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One disadvantage of a corporation is that the net income is |
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subject to double taxation |
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Recording merchandise or other items bought at the actual |
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amount paid is an application of the historical cost accounting |
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concept |
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Recording revenue from business activities and expenses |
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associated with earning that revenue in the same accounting |
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period is an application of matching expenses with revenue |
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accounting concept |
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Stating business transactions in numbers that have common |
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0.values is an application of the unit of measurement accounting concept
Analyzing accounting concepts
Section C. For each item below, select the choice that best completes the sentence. Write the letter identifying your choice.
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Grading and administering the CPA examination is the |
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responsibility of the (A) IMA (B) SEC (C) AICPA (D) FASB |
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Recording and reporting financial information separately from the |
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owner’s personal financial information is an application of the |
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accounting concept (A) business entity (B) going concern (C) |
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objective evidence (D) adequate disclosure |
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Applying the same accounting concepts in the same way in each |
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accounting period is an application of the accounting concept (A) |
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adequate disclosure (B) going concern (C) consistent reporting (D) |
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accounting period cycle |
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Recording and reporting as separate items in accounting records |
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and financial statements those business activities creating dollar |
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amounts large enough to affect business decisions is an application of |
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the accounting concept (A) consistent reporting (B) materiality (C) |
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adequate disclosure (D) objective evidence |
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Preparing a source document for each transaction is an application |
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of the accounting concept (A) historical cost (B) adequate disclosure |
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(C) realization of revenue (D) objective evidence. |
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Recording revenue at the time goods or services are sold is an |
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application of the accounting concept (A) realization of revenue (B) |
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adequate disclosure (C) consistent reporting (D) historical cost. |
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Test 5
The Forms of Financial Reporting in Accounting Practices
Part A
Choose a correct variant
1.Financial statements are ... in accounting
a)an insignificant tool for analysing business activity
b)a perfect and realistic picture of a business
c)the most important means of communicating accounting information to users
2.Financial statements are used ... about the business.
a)to show the accountant's best effort to represent a real picture of a business
b)to communicate the required information to users
c)to provide the management with some data
3.Each of major financial statements ...
a)deals with a particular aspect of position of a company.
b)shows a realistic and perfect picture of the financial position of a business.
c)does not communicate important accounting information.
4.The income statement is also called ...
a)the cash flow statement.
b)profit and loss account.
c)a part of the balance sheet.
5.The income statement...
a)shows the amount of revenues earned and expenses incurred by a business over a period of time.
b)does not indicate the changes in financial position relating to investments and financing activities.
c)does not measure whether the business achieved or failed to perform its objectives.
6.A good source of accounting information about a major public corporation is the ...
a)company's local office.
b)company's annual report.
c)company's product catalogue.
7.A financial statement which shows the financial position of a business at a particular date is called ...
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a)the cash flow statement.
b)the balance sheet.
c)the income statement.
8.A statement that gives an indication of cash movements during an accounting period is called ...
a)the statement of financial position and is dated as of certain date.
b)a profit and loss account.
c)the cash flow statement.
9.The technique that shows essential relationships in financial statements to facilitate comparisons from period to period and among companies is called ...
a)financial analysis.
b)financial statements analysis.
c)investments analysis.
10.Financial statements analysis is useful...
a)when it is necessary to judge past performance.
b)in making well-grounded managerial decisions.
c)only in judging potential risks.
11.The analysis of current position makes it possible ...
a)to judge past performance as well as future potential risks.
d)to overestimate assets and liabilities.
c)to decrease the company's debts.
12.As a rule, investments risks depend on ...
a)the value of the investments (market price of the company's stock).
b)how easy it is to predict future profitability or liquidity.
c)the trends of the past sales.
13.Assets which may be realised in cash or sold during an operational cycle are called ...
a)non-current assets.
b)current assets.
c)notes receivables.
14.Temporary investments accounts, notes receivable and inventory are ...
a)non-current assets.
b)current assets.
c)liabilities.
15.Liabilities can be split into ...
a)current and non-current.
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b)mortgages and long-term notes.
c)temporary investments and inventories.
16.As a rule, the balance sheet consists of ...
a)current and non-current assets.
b)assets, liabilities and equity.
c)paid-in capital and earned capital or retained earnings.
17.Which of the following can be regarded as an asset of a business for accounting purposes?
a)a computer bought in 2001
b)office premises rented by the business
c)the good reputation of the business with its clients.
18.Current liabilities are ...
a)accrued income and cash.
b)bank overdraft and accrued expenses (taxes due and goods supplied on credit).
c)debts of a business that fall due more than one year ahead.
19.Owner's equity can be defined as ...
a)assets and liabilities.
b)the resources invested by the business.
c)the sources of financing assets and operating activities.
20.The main ... of this company is that its total revenue is gradually decreasing.
a)deficit
b)deficiency
c)progress
21.Unlike creditors and investors management is the main ... user of accounting information.
a)internal
b)objective
c)important
22.As is known, the income statement... the amount of revenues earned and expenses incurred over a period of time.
a)analyses
b)summarises
c)divides
23.Both external and internal users are interested in receiving reliable information from financial statements ...
a)to communicate it to tax authorities.
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b)to make decisions.
c)to conceal profits earned.
24.Effective decision-making ... the ability to sort out relevant information from numerous facts making adjustments for changing conditions.
a)makes it possible
b)suggests
c)enables
25.There are a number of... in accounting which generally highlight important relationships in the financial statements.
a)models
b)approaches
c)techniques
26.In fact, the balance sheet shows what exactly a company owns. It includes...
a)only liabilities and equity.
b)the sources of financing the assets of a company.
c)assets, liabilities and equity.
27.The sections of the balance sheet are arranged ...
a)differently from country to country.
b)in the same way throughout the world.
c)vertically in all the countries of the world.
28.Prepaid expenses (rent, insurance paid in advance and inventories bought for use) should be classified as...
a)non-current assets.
b)current assets.
c)liabilities.
29.Owner's equity ... as the resources invested by the business.
a)can be defined
b)can be expected
c)can be paid
30.Assets are generally listed in the order of...
a)their importance for a business.
b)the ease of their conversion into cash.
c)the time of their purchase.
31.As is known, Russia's tax revenues in 1996 were ... to cover its budgetary deficit, which was rather big.
a)sufficient
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b)deficient
c)impressive
32. ... of additional financing made it impossible to complete the reorganisation of this industry last year.
a)A big surplus
b)A lack
c)A rapid increase
33.The income statement is considered to be ... financial report because it shows the business's achievement and failures.
a)the least important
b)more important
c)the most important
34.In accordance with statistical data this firm's losses were ... last year as compared with this year.
a)much lower
b)as lower as
c)least lower
35.Our boss says that thanks to computers we spend ... on financial statements analyses now as compared with the last year.
a)much more time
b)half as much time
c)as much time as
36. ... the balance sheet shows the financial position of a business at a particular date.
a)Just like the income statement
b)Similarly to the income statement
c)Unlike the income statement
37.As is known, each financial statement should be headed ...
a)in the same way.
b)differently.
c)in a similar way.
38.Financial statement analysis should highlight... important relationships in the financial statements as possible
a)as much
b)much more
c)as many
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39.A market value of this firm is steadily decreasing and last June it reached a low. At a present it is... as it used to be.
a)half as much
b)far much more
c)twice as much
40.Unlike fixed assets, current assets can be converted into cash...
a)much more easily.
b)with a great difficulty.
c)easily.
Score 2 for each correct answer. Total 80
Part В Find a mistake in the following sentences
A B
1. The IAS balance sheet may include a large amount of fixed assets than the C
Russian balance sheet.
A B
2. They say, in France there are many private professional bodies of accountants C D
and government – controlled bodies of auditors than in Britain.
A B
3. Although financial reporting practices in the English-speaking world vary from C D
country to country there is much in common in them. Perhaps the more obvious characteristic is the emphasis on «fair presentation».
A B C
4. According to our boss accounting in Russia is rigidly regulated and close to the D
Central European one than the Anglo-American model.
A B
5. The management of this company is dissatisfied with its office premises C D
because they need three times as large as they have now.
A C