38.A strong internal control structure:
A. Contributes to the accuracy and verifiability of the accounting records.
B. Will prevent a business from operating at a loss.
C. Assures that a business will remain solvent.
D. Will prevent fraud, theft, and embezzlement.
39.The best definition of an accounting system is:
A. Journals, ledgers, and worksheets.
B. Manual or computer-based records used in developing information about an entity for use by managers and also persons outside the organization.
C. The personnel, procedures, devices, and records used by an entity to develop accounting information and communicate this information to decision makers.
D. The concepts, principles, and standards specifying the information which should be included in financial statements, and how that information should be presented.
40.The objectives of an accounting system include all of the following,
except:
A. Interpret and record the effects of business transactions.
B. Classify the effects of transactions to facilitate the preparation of reports.
C. Summarize and communicate information to decision makers.
D. Dictate the specific types of business transactions that the enterprise may engage in.
41.Suppose a number of your friends have organized a company to develop and sell a new software product. They have asked you to loan them $8,000 to help get the company started, and have promised to repay your $8,000 plus 10% interest in one year. Of the following, which amount may be described as the return on your investment?
A. $8,000
B. $800
C. $8,800
D. $7,200
Return on investment is payment for usage of the money—interest in this setting. 10% × $8,000 = $800.
42.Which of the following is generally
not
considered one of the general purpose financial statements issued by a corporation?
A. Income statement forecast for the coming year.
B. Balance sheet.
C. Statement of financial position.
D. Statement of cash flows.
43.Which of the following is considered a return "on" investment?
A. Dividends.
B. Repayment of a loan.
C. Purchase of an asset.
D. Securing a loan.
44.The financial statements of a business entity:
A. Include the balance sheet, income statement, and income tax return.
B. Provide information about the cash flow prospects of the company.
C. Are the first step in the accounting process.
D. Are prepared for a fee by the Financial Accounting Standards Board.
45.Which of the following are
not
considered "external" users of financial statements?
A. Owners.
B. Creditors.
C. Labor unions.
D. Managers.
46.Financial statements are designed primarily to:
A. Provide managers with detailed information tailored to the managers' specific information needs.
B. Provide people outside the business organization with information about the company's financial position and operating results.
C. Report to the Internal Revenue Service the company's taxable income.
D. Indicate to investors in a particular company the current market values of their investments.
47.The principal difference between management accounting and financial accounting is that
financialaccounting
information is:
A. Prepared by managers.
B. Intended primarily for use by decision makers outside the business organization.
C. Prepared in accordance with a set of accounting principles developed by the Institute of Certified Management Accountants.
D. Oriented toward measuring solvency rather than profitability.