Mixed Deck — All CGA Topics Flashcards

Which analysis technique compares actual results to budgeted figures to identify and explain differences?

Answer: Variance analysis

Variance analysis decomposes the difference between actual and budgeted (or standard) results into price, volume, and efficiency components for management investigation.

What does the 'integrity' component of the CIA triad in information security mean?

Answer: Data is accurate, complete, and has not been improperly modified

Integrity ensures that data remains accurate and unaltered except through authorized processes, protecting against unauthorized modification.

Under ASC 606, variable consideration (e.g., rebates, discounts) should be included in the transaction price only to the extent it is:

Answer: Probable that a significant reversal will not occur

ASC 606 requires variable consideration to be constrained — included only when it is probable that a significant revenue reversal will not occur when the uncertainty resolves.

Which term refers to costs that vary with production volume?

Answer: Variable costs

Variable costs are expenses that change in direct proportion to the volume of goods or services produced. As production increases, total variable costs rise, and as production decreases, they fall. Examples include raw materials and direct labor costs, which are directly tied to each unit manufactured, making them fluctuate with production levels.

Which characteristic of useful financial information ensures that different knowledgeable users would reach similar conclusions?

Answer: Verifiability

Verifiability means that independent observers using the same methods would reach consensus on whether information faithfully represents economic phenomena.

Which of the following is an example of a preventive control in an internal control system?

Answer: Segregation of duties

Segregation of duties prevents errors or fraud from occurring by ensuring no single individual controls all aspects of a transaction.

What is the legal concept of 'piercing the corporate veil'?

Answer: Holding shareholders personally liable for corporate obligations in cases of abuse

Piercing the corporate veil occurs when courts hold shareholders personally liable for corporate debts because the corporate form was used improperly or fraudulently.

Which financial statement presents information about cash receipts and cash payments during a period?

Answer: Statement of cash flows

The statement of cash flows classifies and reports cash inflows and outflows from operating, investing, and financing activities.

A company has a contribution margin ratio of 40% and fixed costs of $200,000. What is the breakeven point in sales dollars?

Answer: $500,000

Breakeven sales = Fixed costs ÷ Contribution margin ratio = $200,000 ÷ 0.40 = $500,000.

A self-employed individual earns $150,000 in net self-employment income. What percentage of self-employment tax is deductible as an above-the-line deduction on Form 1040?

Answer: 50%

Self-employed individuals may deduct 50% of self-employment taxes paid as an above-the-line adjustment to income.

A CGA discovers during an audit that a client is engaged in tax fraud. Under ethical standards, the CGA should first:

Answer: Discuss the matter with the client and consider resigning if unresolved

Professional standards require the accountant to first communicate with client management, and if unresolved, consider resignation to avoid association with the misconduct.

What is the main purpose of financial accounting?

Answer: To communicate financial info to stakeholders

The main purpose of financial accounting is to provide relevant and reliable financial information to external stakeholders, such as investors, creditors, and regulatory bodies. This information, typically presented in financial statements, helps these parties make informed economic decisions. It ensures transparency and accountability regarding a company's financial health and performance.

In transfer pricing, the minimum transfer price a selling division should accept is generally:

Answer: The variable cost plus any lost contribution margin on external sales

The selling division's minimum acceptable price covers its variable cost plus any opportunity cost from foregone external sales.

In public sector accounting, 'net debt' is defined as:

Answer: Financial liabilities minus financial assets

Net debt is a key public sector indicator calculated as financial liabilities minus financial assets, measuring the government's future revenues needed to pay existing obligations.

Which of the following best describes 'tolerable misstatement' in audit sampling?

Answer: The maximum monetary misstatement acceptable without affecting the audit conclusion

Tolerable misstatement is the maximum error in the population that the auditor is willing to accept and still conclude the balance is fairly stated.

Under the alternative minimum tax (AMT) system, which of the following is an AMT preference item that must be added back to compute AMTI?

Answer: Accelerated depreciation on personal property in excess of ADS depreciation

Excess depreciation claimed under MACRS over what would be allowed under the Alternative Depreciation System (ADS) is a tax preference item added back for AMT purposes.

When a company restates prior-period financial statements due to an error, the correction is reported as an adjustment to:

Answer: Beginning retained earnings of the earliest period presented

Prior-period error corrections are reported as adjustments to the opening retained earnings balance of the earliest period presented in comparative statements.

Which of the following best describes a cost center within a responsibility accounting system?

Answer: A unit held responsible only for the costs it incurs

A cost center manager is accountable only for controlling costs, not for generating revenue, since they have no authority over pricing or sales.

Which of the following describes a 'cost center' in responsibility accounting?

Answer: A unit evaluated only on the costs it incurs, without revenue accountability

A cost center manager is held accountable only for controlling costs, not for generating revenue or managing assets.

Which of the following would be classified as an investing activity on the statement of cash flows?

Answer: Purchase of equipment for cash

Purchases of long-lived assets like equipment represent investing activities since they involve acquiring productive resources.