Question

.1. Which of the following is not a correct statement about accounting?

a. Generally accepted accounting principles (GAAP) is a set of accounting standards used in the preparation of financial statements.

b. Financial Accounting Standards Board (FASB) is a private organization delegated by the Federal Reserve with the responsibility to establish the GAAP.

c. Management accountants work with a business or nonprofit organizations, preparing reports and analyzing financial info.

d. Public accountants provide a variety of accounting services for clients on a fee basis.

e. Government accountants work for a wide variety of government agencies at the local, state, and federal levels.   

2. Which of the following is a not correct statement about accounting?

a. Financial accounting is the branch of accounting that prepares financial statements for use by owners, creditors, suppliers, and other external stakeholders.

b. Managerial accounting is a branch of accounting that provides reports and analysis to managers to help them make informed decisions.

c. Balance sheet reports the financial position of a firm by the firm’s capital structure.

d. Income statement reports the revenues, expenses, and total gross profit resulting from a firm’s operation.

e. Cash flow statement identifies a firm’s sources and uses of cash in a given accounting period.

3. Which of the following is not a correct statement about financial statements?

a. “Assets = Liabilities + Equity” is called accounting equation.

b. Assets are resources owned by a firm.

c. Liabilities are claims owed to outsiders (creditors) against a firm’s assets.

d. Equity is the claim a firm’s owners (stockholders) have against their company’s assets.

e. Assets, liabilities, and equity are income statement line items.

4. Which of the following is not a correct statement about financial statements?

a. Revenue refers to increases in a firm’s assets resulting from the sale of stocks, or other activities intended to earn income.

b. Expenses are resources used up as the result of business operations.

c. Accrual-basis accounting recognizes revenue when it is earned and matches expenses to the revenues they helped produce.

d. Main sources of a firm’s income are sales revenue and investment income.

e. Main sources of expenses are cost of goods sold (CGS) and operating expenses.

5. Which of the following is a not a correct statement about financial statements?

a. Current assets refer to mostly liquid assets (financial capital) and inventory.

b. Non-current assets refer to mostly fixed assets (physical capital) such as plant, equipment, and properties including land & building.

c. Current liabilities refer to long-term payment obligations such as accounts payable and notes payable.

d. Non-current liabilities refer to long-term debt such as bonds and mortgage.

e. Liquid assets include cash, cash-equivalents, stocks and bonds, and accounts receivable.

6. Which of the following is not a correct statement about cash flow statement?

a. Cash flows from operating activities show the amount of cash that flowed into the company from the sale of goods and/or services, as well as cash from dividends and interest received.

b. Cash flows from investing activities show the amount of cash received from the sale of fixed assets and financial assets, as well as cash used to buy these assets as long-term investment.

c. Cash flows from financing activities show the cash the firm received from issuing additional shares of its own stock or from taking out long-term loans.

d. Cash flows from operating activities don’t have to show the amount of cash used to cover expenses resulting from operations and any cash payments to purchase securities held for short-term trading purposes.

e. Cash flows from financing activities also include cash outflows from payment of dividends and to repay principal on loans.

7. Which of the following is not a correct statement?

a. Liquid ratios measure the ability of a firm to obtain the cash it needs to pay the shot-term debt obligations as they come due. Examples are current ratios and acid test.

b. Asset management ratios measure how effectively a firm is using its assets to generate revenues or cash. Examples are inventory turnover ratio and fixed asset turnover ratio.

c. Financial leverage refers to the use of debt in a firm’s capital structure.

d. Leverage ratios measure the extent to which a firm relies on equity financing in its capital structure. Examples are coverage ratio and equity ratio.

e. Profitability ratios measure the rate of return a firm earns on various measures of investment. Examples are ROA and ROE.

Answer 1

1.correct option :B. FASB is a private organisation delegated by the federal resrve with the responsibility to establish GAAP.

explanation: this option is incorrect because FASB is not delegated by federal reserve, but financial accounting foundation (FAF) to establish generally accepted accounting priciples.

2. correct option : D. income statement reports the revenues , expenses , and the total gross profit resulting from a firm's operations.

explanation: this option is incorrect because income statment shows revenue, expenses, amd gross profit for operating activities as well as non-operating activities of business.

3. correct option: E. Assets, liabilities, and equity are income statement line items.

only expenses and revenues are included in income statement. asset, liabilities and equity does'nt included in income statement.