Which activity is NOT part of the personal budgeting process? (M01) A) Defining goals B) Monitoring outcomes C) Increasing income D) Redefining goals - ✔✔Answer: C Correct! Increasing income is not part of the budgeting process, although it may cause an adjustment to the budget. In terms of budgeting, which goal and behavior work best together? (M01) A) The goal is to purchase a home. The behavior is saving 5% of your earnings for a down payment. B) The goal is to reduce living expenses. The behavior is buying a luxury home. C) The goal is to save money for school. The behavior is eating dinner out five days a week. D) The goal is paying off college loans. The behavior is getting a part-time job and using that money to pay for a vacation. - ✔✔Answer: A Correct! The behavior of saving part of your earnings for a down payment is well-aligned with the goal of purchasing a home. Which statement concerning short-term and long-term budgeting is NOT correct? (M01) A) The budgeting process should include short-term and long-term income and expenditure items. B) Long-term budgets include nonrecurring expenditures. C) Recurring income and expenditures are usually included in a short-term budget. D) Short-term budgets span a time period of at least one year for nonrecurring items. - ✔✔Answer: D Correct! Short-term budgets do not include nonrecurring items and are usually no longer than 12 months. Which item is neither recurring income nor a recurring expenditure? (M01) A) Apartment rent B) Car maintenance C) Utilities D) Cash gift - ✔✔Answer: D Correct! This is nonrecurring income as it is generally not a regular, routine income source. Which item would least likely be a reason to adjust a personal budget? (M01) A) Change in employment B) Change in family size C) Change in work schedule D) Family relocation - ✔✔Answer: C Correct! A change in work schedule is LEAST likely to impact a person's personal budget as it may not necessarily affect income or expenditures. Which goal is NOT a reason to reconcile a bank statement? (M01) A) To determine that all deposits made into the bank have been properly recorded B) To determine which checks written have been paid and which checks are outstanding C) To determine eligibility for a favorable loan arrangement for a new home D) To determine that personal banking records and those of the bank agree - ✔✔Answer: C Correct! This is not a reason to reconcile a bank account. Which statement about allocating money into budgeted expenses is NOT correct? (M01) A) The money allocated to budgeted fixed expenses is usually the right amount. B) Allocating money into budgeted expenses allows one to track budget performance to actual expenditures. C) Allocating money into budgeted expenses should include nonrecurring income. D) Allocating money into budgeted expenses is beneficial when comparing actual spending against the budget. - ✔✔Answer: C Correct! This statement is not true. Nonrecurring income should not be allocated to expenses because these are not funds that are received regularly. The process of providing financial information to prospective investors is referred to as _______. A) public accounting B) financial accounting C) managerial accounting D) governmental accounting - ✔✔Answer: B Correct! Financial accounting is the practice of recording and aggregating financial transactions into financial statements. Which form is generally included among the basic financial statements? (M02) A) Balance sheet B) Federal income tax return C) 10-S Report D) Form 10-Q - ✔✔Answer: A Correct! A balance sheet reports a company's assets and liabilities and its shareholders' equity at a specific point in time. It also provides a basis for computing rates of return and evaluating its capital structure. Under U.S. GAAP, what is one of the primary objectives of financial reporting? (M02) A) To assess a firm's product lines B) To assess a firm's cash flow predictions C) To assess a firm's economic resources and obligations D) To assess a firm's financing and investing activities - ✔✔Answer: B Correct! Under GAAP, the primary objectives of financial reporting are the following: (1) to provide information that is useful for decision-making; (2) to help predict cash flows; and (3) to obtain information about economic resources, claims to resources, and changes in resources and claims. What can be found on a balance sheet? (M02) A) The amount of net income or loss B) The results of business operations C) The financial position of a business at a specific point in time D) All revenues and expenses - ✔✔Answer: C Correct! The balance sheet shows the financial position of a company by listing its resources, debts, and ownership claims. What is the primary reason a bank would be interested in a company's financial statements? (M02) A) To evaluate the company's ability to compete against other companies B) To evaluate the company's federal income tax return C) To evaluate the company's ability to apply for a line of credit D) To evaluate the company's decisions regarding its manufacturing facilities - ✔✔Answer: C Correct! A bank studies a company's financial statements to ensure it can pay back the line of credit if it is extended.