1. Which of the following items are part of a business’s set of financial statements? a. Income statement b. Balance sheet c. Statement of cash flows d. Both a. and b. above e. a., b., and c. above Answer: _____ 2. True or False: The requirement to provide financial accounting information is driven by the need for outside stakeholders (primarily investors) to have reliable information about the financial status of an organization. a. True b. False Answer: _____ 3. True or False: The set of rules and regulations that govern the content and format of financial statements is called Government Acceptable Procedures (GAP). a. True b. False Answer: _____ 4. Which of the following statements about cash versus accrual accounting is most correct? a. In cash accounting, an event is recognized when a cash transaction occurs. b. In accrual accounting, an event is recognized when a cash transaction occurs. c. Most large healthcare organizations use cash accounting. d. Most small healthcare organizations use accrual accounting because it closely matches statements required for income tax purposes. e. In cash accounting, an event is recognized when the obligation for a cash transaction is created. Answer: _____ 5. Which of the following statements about the income statement is most correct? a. It has several alternative names, including the statement of liabilities. b. It reports the financial status of an organization as of a single point in time. c. It reports the economic profitability of an organization. d. Its three major sections are operating costs, nonoperating costs, and total (net) costs. e. Income statements are always prepared annually, but never for shorter periods (for example, quarterly). Answer: _____ 6. Which of the following statements about gross and net patient service revenue is most correct? a. Gross revenue reports revenue based on chargemaster prices. b. Net revenue is gross revenue less discounts and charity care. c. Net revenue is gross revenue less discounts, charity care, and bad debt losses. d. Both a. and b. above are correct. e. Both a. and c. above are correct. Answer: _____ 7. True or False: Under accrual accounting, all revenues reported on the income statement represent cash collections. a. True b. False Answer: _____ 8. True or False: Under accrual accounting, all expenses reported on the income statement represent cash costs. a. True b. False Answer: _____ 9. Which of the following statements about income statement expenses is most correct? a. Supplies are expensed (shown) on the income statement when purchased. b. Supplies are expensed (shown) on the income statement when consumed (used to provide patient services). c. All lease expense is reported on the income statement. d. Both a. and c. above are correct. e. Both b. and c. above are correct. Answer: _____ 10. Which of the following statements concerning depreciation expense is most correct? a. Depreciation expense accounts for the loss of value of inventory. b. Depreciation expense accounts for the loss of value of securities investments. c. Depreciation expense accounts for the loss of value of fixed assets (plant and equipment). d. For accounting purposes, depreciation expense is calculated by the double declining balance method. e. For accounting purposes, depreciation expense is calculated by the triple declining balance method. Answer: _____ 11. Which of the following statements concerning net income is most correct? a. Net income is the “bottom line” of the income statement. b. Net income measures total profitability as defined by accounting rules and regulations. c. In not-for-profit businesses, the entire amount of net income is reinvested in the business. d. Both a. and b. above are correct. e. a., b., and c. above are correct. Answer: _____ 12. Which of the following statements concerning net income versus cash flow is most correct? a. Net income is a rough measure of a business’s cash flow. b. Net income can be converted into …
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