Friday, August 5, 2016

Financial Reporting Test Answers



Ques : Which of the following does Financing Activities not include?
Ans  : Payments to vendors

Ques : Which of the following errors/s can a trial balance be used to detect?
Ans  :  An entry where both sides of the transaction are entered as a debit

Ques : Which of the following errors/s can a trial balance be used to detect?
Ans  :  A transposition error when entering the credit side of an entry

Ques : Which of the following are the 3 main sections of Statement of Cash Flows?
Ans  : Operating, Investing, Financing

Ques : Which of the following does the cash flow cycle measure?
Ans  : The time between purchase of raw materials and collection of cash

Ques : Which of the following is not a fundamental of accounting?
Ans  : Magnitude

Ques : Which of the following is a difference between a public company and a private one?
Ans  :  Public companies must have audited financial statements and prepared SEC reports

Ques : What does the indirect method of preparing the cash flow statement effectively accomplish?
Ans  : It takes the accrual basis of accounting and converts it to cash basis

Ques : Which cash collection technique is the most cost-effective for companies with many locations?
Ans  : Self-addressed stamped envelopes

Ques :  How does Treasury Stock differ from Trading Stock?
Ans  : Treasury stock has no voting or dividend rights

Ques : How often do companies typically generate standard financial reports?
Ans  : Monthly

Ques : What is one procedure a Company Manager would take to make the information on financial reports more useful for examination?
Ans  : Use the information on the financial reports to do a financial analysis, creating comparable ratios

Ques : How does the income statement of a charity differ from that of a public company?
Ans  : Charities produce a similar report which shows funding sources, and program expenses and other commitments

Ques : In what general way do investors use the information in the financial statements?
Ans  : To determine if a company is worth investing in

Ques : In what general way do investors use the information in the financial statements?
Ans  : To determine if a company is worth investing in

Ques :  To determine if a company is worth investing in
Ans  : Capital

Ques : A company declares a dividend. What is its effect on the cash?
Ans  :  It decreases Cash

Ques : How are the Cash Flow Statement and Balance Sheet related?
Ans  : Changes in Accounts Receivable and Accounts Payable are reflected on the Cash Flow Statement

Ques : Which is/are the primary financial statements used to measure liquidity?
Ans  : Cash Flow Statement and Balance Sheet

Ques : What is the primary reason a government entity would want to look at a company's financial statements?
Ans  : To determine tax liability

Ques : A company pays out a previous declared common stock dividend. What is its effect on the cash?
Ans  : It will decrease

Ques : What is the purpose of a trial balance?
Ans  : To act as a worksheet, making sure all debits equal all credits, as well as aid in the discovery of issues

Ques : The best financial report to see a company's cash balance is ______.
Ans  : Balance Sheet

Ques : What purpose would a company's financial statements have for the lending institutions?
Ans  : To determine if the company is meeting current covenants in their existing debt agreement

Ques : Financial managers use the _____________ to plan for monthly financing needs.
Ans  : cash budget

Ques : What is another name for the Balance Sheet?
Ans  : Statement of Financial Position

Ques : How are the Cash Flow Statement and Balance Sheet related?
Ans  : Ending cash balance from the Cash Flow Statement is transferred to the Balance Sheet

Ques : What are the four traits of a useful financial statement?
Ans  : Understandable, Relevant, Reliable, Comparable

Ques : What is the purpose of an income statement?
Ans  : To show the reader how the company made and spent money in the period presented

Ques : What is Treasury Stock?
Ans  : Stock repurchased by the issuing company, reducing the amount of stock outstanding in the open market

Ques : How do investors turn the information on the financial statements into more useful data which is comparable to other companies?
Ans  : Perform financial analysis

Ques : What is another name for the Income Statement?
Ans  : Profit & Loss Statement

Ques : Which is/are the primary financial statements used to measure solvency?
Ans  : Balance Sheet and Income Statement

Ques : The formula to calculate Ending Retained Earnings is ______.
Ans  : Ending Retained Earnings = Beginning RE - Investments - Dividends Paid + Net Income

Ques : The three sections of a Statement of Cash Flows are _____.
Ans  : Operating, investing, financing

Ques :  What does GAAP stand for?
Ans  : Generally Accepted Accounting Principles

Ques : Which financial statement best allows a firm to assess its ability to pay dividends?
Ans  : Statement of Cash Flows

Ques : What is one possible use employees would have of the company financial statements?
Ans  : It helps the employees to demonstrate their own personal contribution to the company

Ques : Which of the following transactions would have no impact on the stockholder's equity?
Ans  :  Purchase of land from the proceeds of a bank loan

Ques : Which of the following transactions is a non cash event but would be disclosed in the notes of the Statement of Cash Flows?
Ans  : Exchange of shares for an asset

Ques : What does the Balance Sheet reflect?
Ans  : Net changes over a period of time

Ques : How does Gross Income differ from Net Income?
Ans  : Gross Income measures profitability before operating expenses, whereas Net Income is calculated after all operating expenses

Ques : What is historical value?
Ans  : The original cost or price paid for an asset

Ques : When a company files a statement of their financial plans for the next two years with the SEC,  it is called a ______.
Ans  : Prospectus

Ques : What does Treasury Stock appear on the balance sheet as?
Ans  : As a reduction of opening Retained Earnings

Ques : What are the main categories of a balance sheet?
Ans  :  Assets, Liabilities, Equity

Ques : What way is government accounting different from public company accounting?
Ans  : The chart of accounts and financial statements are classified and organized differently

Ques : What is the one problem while comparing financial statements with companies based in different countries?
Ans  : Countries use different accounting standards, comparisons can only be made directly with countries using GAAP

Ques : Which is the primary financial statement used to measure profitability?
Ans  : Income Statement

Ques : How are the income statement and balance sheet linked?
Ans  :  Net income from the income statement transfers to the balance sheet equity section

Ques : Which method of preparing the statement of cash flows begins with Net Income?
Ans  : Indirect

Ques : By doing/issuing which of the following could a company raise short-term funds by selling receivables and inventory?
Ans  : By line of credit

Ques : How would the financial statements be useful for a Company Manager?
Ans  : To make operational decisions based on comparing past and current results

Ques : What is one possible use employees would have for the company financial statements?
Ans  : Employees have a vested interest in the company for job security and any equity incentive they have

Ques : What is the purpose of the statement of cash flows?
Ans  : To demonstrate how the company used their cash in the period reported

Ques : Pro forma statements are _______ statements.
Ans  : next years'

Ques : Retained earnings will change over time because of several factors. Which of the following factors would lead to an increase in the Retained Earnings?
Ans  : Net income

Ques : Which is/are the primary financial statements used to measure stability?
Ans  :  Balance Sheet

Ques : What is the purpose of an audit?
Ans  : To verify that statements made by the company are true based on an independent party's evaluation

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