Exam 1: Introduction to Accounting and Business

The main objective for all business is to maximize unrealized profits.

Which of the following is the best description of accounting's role in business?

Using the following accounts and their amounts, prepare in good format an Income Statement for Bright Futures Company, month ended August 31, 2011: Telephone Expense \ 1,150 Cash \ 3,000 Accounts Payable \ 1,540 Jason Bright, Drawing \ 800 Fees Earned \ 15,700 Rent Expense \ 1,400 Supplies \ 140 Accounts Receivable \ 1,500 Computer Equipuent \ 20,000 Jason Bright, Capital \ 14,320 Wages Expense \ 4,800 Utilities Expense \ 750 Notes Payable \ 2,400 Office Expense \ 420

Most businesses in the United States are

Donner Company is selling a piece of land adjacent to their business premises. An appraisal reported the market value of the land to be $220,000. The Focus Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost concept, at what amount should the land be recorded in the accounting records of Focus Company?

Proprietorships are owned by one owner and provide only services to their customers.

The accountant for Franklin Company prepared the following list of account balances from the company's records for the year ended December 31, 2011: Fees Earned \ 165,000 Cash \ 30,000 Accounts Receivable 14,000 Selling Expenses 44,000 Equipment 64,000 Franklin, Capital 27,000 Accounts Payable 12,000 Interest Income 3,000 Salaries \& Wages Expense 40,000 PrepaidRent 2,000 Income Taxes Payable 5,000 Income Taxes Expense 18,000 Notes Payable 20,000 Rent Expense 20,000 Determine the total liabilities at the end of 2011 for Franklin Company.

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.

Which type of accountant typically practices as an individual or as a member of a public accounting firm?

Financial reports are used by

A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing

Which of the following financial statements reports information as of a specific date?

Receiving a bill or otherwise being notified that an amount is owed is recorded until the amount is paid.

The cost concept is the basis for entering the exchange price into the accounting records.

Accounting information users need reports about the economic activities and condition of businesses.

No significant differences exist between the accounting standards issued by the FASB and the IASB.

Explain the meaning of: (a) the objectivity concept and (b) the unit of measure concept

Expenses are recorded when

There are four transactions that affect Owner's equity. (a) What are the two types of transactions that increase Owner's equity? (b) What are the two types of transactions that decrease Owner's equity?