TrueFalse Questions - Chapter 1 What Is Financial Accounting, and Why...

©2013 Flat World Knowledge, Inc.Chapter 1 What Is Financial Accounting, and Why Is It Important?Section 1 True/False Questions 1.Financial accounting is limited to analyzing the financial information conveyed through financial statements.False; Easy 2.The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business.True; Easy 3.Employees of a company would not have a reason to use the information provided by financial accounting.False; Easy 4.Financial accounting should be used for assessing the financial health of large organizations only.False; Moderate 5.Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer.True; Easy 6.Lenders might use the information produced by financial accounting when making loan decisions.True; Easy 7.Credit analysts prefer not to use information provided by financial accounting, as it is not accurate.False; Easy 8.Financial accounting is helpful to investment advisors.True; Easy 9.Financial accounting is more useful than managerial accounting.False; Easy 10.The decision to buy or rent equipment is an example of a decision aided by managerial accounting.True; Moderate Financial Accounting v. 2.0 Joe Ben Hoyle Skender (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Hoyle, Financial Accounting 2.0 ©2012 Flat World Knowledge, Inc. 2 Multiple Choice Questions 11.Which of the following statements is true of financial accounting?a.It is used to make lease or purchase decisions.b.It is primarily used to make internal decisions of a business.c.It is used by external parties to make investment decisions.d.Managerial accounting is another name for financial accounting, e.The effectiveness of advertising can be judged using financial accounting.c; Moderate 12.The charge for using money over time, often associated with long-term loans, is

known as:

• cash dividend.

b.interest.

• preferred dividend.

d.principal.

• distribution charge.

b; Easy 13.Which of the following is a decision that would most likely involve managerial accounting information?

• Loaning money to another company

b.Deciding whether to buy or rent equipment

• Investing in the stock of another company

d.Deciding whether to extend credit to a potential customer

• Choosing which employer to work for based on future prospects

b; Moderate 14.Which of the following decisions would be considered more of a managerial accounting decision than a financial accounting decision?

• Loaning money to Company X instead of Company Y

b.Determining that Company J is more profitable than Company K

• Investing in the stock of Company T instead of Company U

d.Deciding the price to be charged for a new product

• Deciding whether to extend credit to Company L

d; Moderate 2 / 4

Hoyle, Financial Accounting 2.0

©2012 Flat World Knowledge, Inc.

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• Who among the following are the users of managerial accounting information?
• Lender

b.Competitors

• Government

d.Third Party Investor

• Board of Directors

e; Moderate

• Who are the common users of financial and managerial accounting information?
• Government

b.Managers

• Shareholders

d.Competitors

• Customers

b; Moderate

• Which of the following is a common feature of financial and managerial accounting?
• Both have same objectives

b.Both are reported at year end in the annual report

• Both are analyzed by external users while making investment decisions

d.Both are used by the management in making decisions

• Both are prepared according to U.S. GAAP

d; Moderate

• Financial accounting rules require interest to be reported at a reasonable rate:
• at the beginning of the accounting period.

b.when a floating rate is set by the creditor.

• when specified interest rate is higher than market rate.

d.when specified interest rate is less than market rate.

• when interest rate is not specifically mentioned in the debt agreement.

e; Moderate

• Which of the following statements is true of financial accounting?
• Managerial accounting is a branch of financial accounting.

b.Financial accounting reports are based on accounting principles.

• Financial accounting and managerial accounting have same objectives.

d.Financial accounting information has no relevance for the employees of a company.

• Financial accounting is optional for companies.

b; Moderate 3 / 4

Hoyle, Financial Accounting 2.0

©2012 Flat World Knowledge, Inc.

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• The communication of financial information within an organization so that internal

decisions can be made in an appropriate manner is known as:

• financial accounting.

b.managerial accounting.

• cost analysis.

d.tax accounting.

• information analysis.

b; Moderate

Fill in the blanks

• _____ accounting is the communication of information about a business so that its

financial health can be assessed.Financial; Easy

• The two types of accounting are _____ accounting and _____ accounting.

financial, managerial; Easy

• _____ is the communication of financial information for decision-making

purposes.Accounting; Easy

Short Answer Questions

• Explain why non-accountants need an understanding of financial accounting.

Financial accounting conveys information, which helps users make decisions about the financial health of an organization. Employees, prospective employees, loan officers, and investment counselors are just a few of the groups who could benefit from understanding financial accounting.Easy

• Explain the difference between financial accounting and managerial accounting.

Financial accounting provides information to external users to make decisions about that organization. Managerial accounting provides information for internal decision makers.Easy

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