A Firm That Provides Tax Services to the Public Intends

question 72

Multiple Choice

A firm that provides tax services to the public intends to offer a premium tax-return service at a higher price than their current services. The managers of the company ask experts in marketing to determine how much an effective ad campaign for such a service would cost, and by how much sales would be increased. They consult experts in economics to calculate the increases in revenue from the success of the campaign, experts in operations to determine the cost of offering the service, and experts in strategy to anticipate possible countermoves by competitors. This example illustrates which of the following points about the role of financial managers?

• A) Determining the costs associated with making a decision is easier than determining the potential benefits of the decision.
• B) Real-world decisions are complex and require information from many sources if the decisions are to be valid.
• C) All of the costs and benefits associated with a decision can never be fully identified.
• D) Ultimately the decision whether to take a certain course of action rests with the financial managers of a company.

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Definitions:

Temporary Accounts

Accounts used to collect revenues, expenses, and dividends information which are then transferred to permanent accounts at the end of the accounting period.

Closed

Refers to an account or period that has been concluded and no longer accepts entries or transactions.

Accrual Basis

An accounting method where revenues and expenses are recorded when they are earned or incurred, regardless of when the cash is exchanged.

Adjusting Entries

Journal entries made in the accounting records at the end of an accounting period to allocate income and expenditures to the period in which they actually occurred.