Financial and Managerial Accounting: Financial Chapters, 7e (Miller-Nobles) Chapter F:1 Accounting and the Business Environment
Learning Objective F:1-1
1) Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
2) Critical thinking and judgment skills are not necessary for accountants because technology has made the activities routine. Answer: FALSE Explanation: Technology plays an important supporting role in performing routine accounting functions. This allows accountants to have more time to focus on reviewing and evaluating economic activities using critical thinking and judgment. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
3) Accounting starts with economic activities that accountants review and evaluate using critical thinking and judgment to create useful information that helps individuals make good decisions. Answer: TRUE 1 Copyright © 2021 Pearson Education, Inc.
Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
4) Accounting is referred to as the language of business because it is the method of communicating business information to decision makers. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
5) A model called the ________ was created to help students and the public understand what accounting is. A) Decision Making Model B) Business Model C) Pathways Vision Model D) Cost Model Answer: C Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
2 Copyright © 2021 Pearson Education, Inc.
6) The Pathways Vision Model emphasizes that good decisions have an impact on A) accounting judgments and economic activity. B) accounting judgments only. C) economic activity only. D) neither accounting judgments nor economic activity. Answer: A Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Why is Accounting Important? (H1)
7) Managerial accounting focuses on providing information for external decision makers. Answer: FALSE Explanation: Managerial accounting focuses on providing information for internal decision makers. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
8) Investors primarily use managerial accounting information for decision-making purposes. Answer: FALSE Explanation: External users (investors) use financial accounting information. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement 3 Copyright © 2021 Pearson Education, Inc.
PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
9) A creditor is a person who owes money to the business. Answer: FALSE Explanation: A creditor is a person to whom a business owes money. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
10) Income tax is calculated using accounting information. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
11) Financial accounting focuses on information for decision makers outside of the business, such as creditors and taxing authorities. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information 4 Copyright © 2021 Pearson Education, Inc.
12) Business owners use accounting information to set goals, evaluate progress toward those goals, and make adjustments when needed. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
13) Outside investors ordinarily use financial accounting information to decide whether or not to invest in a business. Answer: TRUE Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
14) A creditor is any person who has an ownership interest in a business. Answer: FALSE Explanation: A creditor is any person to whom money is owed. Diff: 1 LO: F:1-1 AACSB: Application of knowledge AICPA Functional: Measurement PE Question Type: Concept H2: Decision Makers: The Users of Accounting Information
5 Copyright © 2021 Pearson Education, Inc.