Financial statements are prepared:

Select one:

a. Only for publicly owned business organizations.

b. For corporations, but not for sole proprietorships or partnerships.

c. In either monetary or non-monetary terms, depending on the decision maker

d. Primarily for the benefit of persons outside of the business organization

1. The basic purpose of an accounting system is to:

Select one:

a. Develop financial statements in conformity with generally accepted accounting principles.

b. Record changes in the financial position of an organization by applying the concepts of double-entry accounting.

c. Provide as much useful information to decision makers as possible, regardless of cost.

d. Meet an organization's need for accounting information as efficiently as possible.

1. Information is cost effective when:

Select one:

a. The information is based upon historical costs, rather than upon estimated market values.

b. The value of the information exceeds the cost of producing it.

c. The information aids management in controlling costs.

d. The information is generated by a computer-based accounting system.

1. Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the information needs of:

Select one:

a. Government agencies such as the Kenya Revenue Authority

b. Investors and creditors.

c. Customers.

d. Trade associations and labor unions.

1. All of the following are characteristics of managerial accounting, except:

Select one:

a. (a) Reports are used primarily by insiders rather than by persons outside of the business entity entity.

b. Its purpose is to assist managers in planning and controlling business operations

c. Information must be developed in conformity with generally accepted accounting principles or with income tax regulations

d. Information may be tailored to assist in specific managerial decisions

1. In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is more likely to:

Select one:

a. View the entire organization as the reporting entity.

b. Be tailored to the specific needs of an individual decision maker.

c. Focus upon the operation results of the most recently completed accounting period.

d. Be used by decision makers outside of the business organization

1. A complete set of financial statements for Hartman Company, at December 31, 2018, would include each of the following, except:

Select one:

a. Statement of projected cash flows for 2019.

b. Notes containing additional information that is useful in interpreting the financial statements

c. Statement of Financial Position as at December 31, 2018

d. Income statement for the year ended December 31, 2018

1. The nature of an asset is best described as:

Select one:

a. An economic resource representing cash or the right to receive cash in the near future

b. An economic resource owned by a business and expected to benefit future operations

c. Something with physical form that is valued at cost in the accounting records.

d. Something owned by a business that has a ready market value.

1. The amount of owner's equity in a business is not affected by:

Select one:

a. Investments made in the business by the owner.

b. The percentage of total assets held in cash

c. The amount of dividends paid to shareholders.

d. The profitability of the business

1. The realization principle indicates that revenue usually should be recognized and recorded in the accounting records:

Select one:

a. When goods are sold or services are rendered to customers.

b. At the end of the accounting period.

c. When cash is collected from customers.

d. Only when the revenue can be matched by an equal shilling amount of expenses

1. The revenue, expense, loss and gain accounts:

Select one:

a. appears on the statement of financial position

b. are permanent accounts

c. are real accounts

d. are temporary accounts

1. The purpose of the post-closing trial balance is to

Select one:

a. prove that no mistakes were made

b. prove the equality of the income statement account balances that are carried forward into the next accounting period

c. list all the statement of financial position accounts in alphabetical order for easy reference.

d. prove the equality of the statement of financial position account balances that are carried forward into the next accounting period

An intangible asset

Select one:

a. does not have physical substance, yet often is very valuable

b. is worthless because it has no physical substance

c. is converted into a tangible asset during the operating cycle

d. cannot be classified on the statement of financial position because it lacks physical substance

Long-term creditors are usually MOST interested in evaluating

Select one:

a. marketability

b. liquidity.

c. profitability

d. solvency.

In periods of rising prices, which of the following inventory methods generally results in the lowest net income figure?

Select one:

a. LIFO method

b. FIFO method

c. Need more information to answer

d. Average cost