Deck 1: Introduction to Accounting and Business

Question 1

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

Answer 1

True

Question 2

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

Answer 2

True

Question 3

Financial accounting reports are relevant only to users within the business.

Answer 3

False

Question 4

Senior executives cannot be criminally prosecuted for the wrongdoings they commit on behalf of the companies where they work.

Question 5

A business is an organization in which basic resources or inputs, such as materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.

Question 6

Managerial accounting information is used by external and internal users equally.

Question 7

Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

Question 8

About 90% of the businesses in the United States are organized as corporations.

Question 9

The role of accounting is to provide many different users with financial information to make economic decisions.

Question 10

Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.

Question 11

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

Question 12

Some of the major fraudulent acts committed by senior executives started as what they considered to be small ethical lapses that grew out of control.

Question 13

The Sarbanes-Oxley Act established standards for corporate responsibility and disclosure.

Question 14

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

Question 15

A merchandising business buys products from other businesses to sell to customers.

Question 16

Proper ethical conduct implies that you only consider what's in your best interest.

Question 17

An example of an external user of accounting information is the federal government.

Question 18

The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.

Question 19

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

Question 20

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

Question 21

If net income for a proprietorship was $50,000, the owner withdrew $20,000 in cash, and the owner invested $10,000 in cash, the capital of the owner increased by $40,000.

Question 22

The unit of measurement concept requires that economic data be recorded in dollars.

Question 23

If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period, the period's change in total owner's equity was a $200,000 increase.

Question 24

Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.

Question 25

An account receivable is a claim against a customer resulting from a sale on account.

Question 26

Receiving payments on an account receivable increases both equity and assets.

Question 27

If the liabilities owed by a business total $300,000 and owner's equity is equal to $300,000, then the assets also total $300,000.

Question 28

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

Question 29

Generally accepted accounting principles regulate how and what financial information is reported by businesses.

Question 30

The financial statements of a proprietorship should include the owner's personal assets and liabilities.

Question 31

If total assets decreased by $30,000 during a specific period and owner's equity decreased by $35,000 during the same period, the period's change in total liabilities was a $65,000 increase.

Question 32

If a building is appraised for $85,000, it is offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer would record the building at $85,000.

Question 33

Paying an account payable increases liabilities and decreases assets.

Question 34

An account receivable is typically classified as a revenue.

Question 35

The accounting equation can be expressed as Assets - Liabilities = Owner's Equity.

Question 36

Cash withdrawals by owners decrease assets and increase equity.

Question 37

Purchasing supplies on account increases liabilities and decreases equity.

Question 38

Revenue is earned only when money is received.

Question 39

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

Question 40

The owner's rights to the assets rank ahead of the creditors' rights to the assets.

Question 41

The following are examples of external users of accounting information except

A) government entities
B) customers
C) creditors
D) managers

Question 42

Assets that are used up during the process of earning revenue are called expenses.

Question 43

Managerial accountants would be responsible for providing information regarding

A) tax reports to government agencies
B) profit reports to owners and management
C) expansion of a product line report to management
D) consumer reports to customers

Question 44

Which of the following is a service business?

A) Microsoft
B) Dell Computers
C) Facebook
D) Walmart

Question 45

The balance sheet represents the accounting equation.

Question 46

Which of the following groups is considered to be internal users of accounting information?

A) employees and customers
B) customers and vendors
C) employees and managers
D) government entities and banks

Question 47

A statement of owner's equity reports the changes in the owner's equity for a period of time.

Question 48

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

A) Certified Public Accountant
B) Certified Payroll Professional
C) Certified Internal Auditor
D) Certified Management Accountant

Question 49

Which of the following best describes accounting?

A) records economic data but does not communicate the data to users according to any specific rules
B) is an information system that provides reports to users regarding economic activities and condition of a business
C) is of no use by individuals outside of the business
D) is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements

Question 50

Two common areas of accounting that respectively provide information to internal and external users are

A) forensic accounting and financial accounting
B) managerial accounting and financial accounting
C) managerial accounting and environmental accounting
D) financial accounting and tax accounting systems

Question 51

Which of the following groups of companies includes examples of merchandising businesses?

A) Delta Air Lines, Marriott, Gap Inc.
B) Gap Inc., Amazon, Nike Inc.
C) GameStop, Sony, Dell
D) GameStop, Best Buy, Gap Inc.

Question 52

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

A) Accounting provides stockholders with information regarding the market value of the company's stocks.
B) Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company.
C) Accounting helps in decreasing the credit risk of the company.
D) Accounting is not responsible for providing any form of information to users. That is the role of the Information Systems Department.

Question 53

The excess of revenue over the expenses incurred in earning the revenue is called capital.

Question 54

An income statement is a summary of the revenues and expenses of a business as of a specific date.

Question 55

The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.

Question 56

The primary financial statements of a proprietorship are the income statement, statement of owner's equity, and balance sheet.

Question 57

Net income and net profit do not mean the same thing.

Question 58

Profit is the difference between

A) assets and liabilities
B) the incoming cash and outgoing cash
C) the assets purchased with cash contributed by the owner and the cash spent to operate the business
D) the amounts received from customers for goods or services and the amounts paid for The inputs used to provide the goods or services

Question 59

Which of the following is a manufacturing business?

A) General Motors
B) Facebook
C) American Airlines
D) Target

Question 60

Financial reports are used by

A) management
B) creditors
C) investors
D) All of these choices

Question 61

For accounting purposes, the business entity should be considered separate from its owners if the entity is

A) a corporation
B) a proprietorship
C) a partnership
D) All of these choices

Question 62

Which of the following would not normally operate as a service business?

A) pet groomer
B) grocer
C) lawn care company
D) styling salon

Question 63

Which of the following concepts relates to separating the reporting of business and personal economic transactions?

A) cost concept
B) unit of measure concept
C) business entity concept
D) objectivity concept

Question 64

Karen Meyer owns and operates Crystal Cleaning Company. Recently, Meyer withdrew $10,000 from Crystal Cleaning, and she contributed $6,000, in her name, to the American Red Cross. The contribution of the $6,000 should be recorded on the accounting records of which of the following entities?

A) Crystal Cleaning and the American Red Cross
B) Karen Meyer's personal records and the American Red Cross
C) Karen Meyer's personal records and Crystal Cleaning
D) Karen Meyer's personal records, Crystal Cleaning, and the American Red Cross

Question 65

The initials GAAP stand for

A) general accounting procedures
B) generally accepted plans
C) generally accepted accounting principles
D) generally accepted accounting practices

Question 66

Within the United States, the dominant body in the primary development of accounting principles is the

A) American Institute of Certified Public Accountants (AICPA)
B) American Accounting Association (AAA)
C) Financial Accounting Standards Board (FASB)
D) Institute of Management Accountants (IMA)

Question 67

Most businesses in the United States are

A) proprietorships
B) partnerships
C) corporations
D) cooperatives

Question 68

Which of the following is not a characteristic of a corporation?

A) Corporations are organized as a separate legal taxable entity.
B) Ownership is divided into shares of stock.
C) Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D) A corporation's resources are limited to its individual owners' resources.

Question 69

Donner Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $220,000. 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?

A) $177,000
B) $212,000
C) $220,000
D) $232,000

Question 70

Which of the following is a guideline for behaving ethically?I.Identify the consequences of a decision and its effect on others.II.Consider your obligations and responsibilities to those affected by the decision.III.Identify your decision based on personal standards of honesty and fairness.

A) I and II
B) II and III
C) I and III
D) I, II, and III

Question 71

On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for sale at $140,000. On May 30, White Repair Service accepted the seller's counteroffer of $115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in White Repair Service's records?

A) $108,000
B) $95,000
C) $140,000
D) $115,000

Question 72

The business entity concept means that

A) the owner is part of the business entity
B) an entity is organized according to state or federal statutes
C) an entity is organized according to the rules set by the FASB
D) the entity is an individual economic unit for which data are recorded, analyzed, and reported

Question 73

Equipment with an estimated market value of $30,000 is offered for sale at $45,000. The equipment is acquired for $15,000 in cash and a note payable of $20,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is

A) $30,000
B) $35,000
C) $15,000
D) $45,000

Question 74

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a

A) proprietorship
B) corporation
C) partnership
D) governmental unit

Question 75

Which of the following is most likely to obtain large amounts of resources by issuing stock?

A) partnership
B) corporation
C) proprietorship
D) government entity

Question 76

The objectivity concept requires that

A) business transactions be consistent with the objectives of the entity
B) the Financial Accounting Standards Board be fair and unbiased in its deliberations over new accounting standards
C) accounting principles meet the objectives of the Securities and Exchange Commission
D) amounts recorded in the financial statements be based on independently verifiable evidence

Question 77

Which of the following is not a certification for accountants?

A) CIA
B) CMA
C) CISA
D) IRS

Question 78

Which of the following is not a role of accounting in business?

A) to provide reports to users about the economic activities and conditions of a business
B) to personally guarantee loans of the business
C) to provide information to external users to determine the economic performance and condition of the business
D) to assess the various informational needs of users and design an accounting system to meet those needs

Question 79

Which of the following is the authoritative body in the United States that has the primary responsibility for developing accounting principles?

A) FASB
B) IRS
C) SEC
D) AICPA

Question 80

Which of the following is true regarding a limited liability company?

A) makes up 10% of business organizations in the United States
B) combines the attributes of a partnership and a corporation
C) provides tax and liability advantages to the owners
D) All of these choices