Deck 1: Welcome to Accounting

Question 1

Accountants do not have to worry about issues of ethics.

Answer 1

False

Question 2

Management of a business enterprise is the major external user of information.

Answer 2

False

Question 3

Owners of business firms are the only people who need accounting information.

Answer 3

False

Question 4

The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

Question 5

Identifying is the process of keeping a chronological diary of events measured in dollars and cents.

Question 6

Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners.

Question 7

The study of accounting is not useful for a business career unless your career objective is to become an accountant.

Question 8

Accounting information is used only by external users with a financial interest in a business enterprise.

Question 9

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.

Question 10

The primary accounting standard-setting body in the United States is the International Accounting Standards Board.

Question 11

Transactions that can be measured in dollars and cents are recorded in the accounting information system.

Question 12

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

Question 13

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.

Question 14

At the time an asset is acquired, cost and fair value should be the same.

Question 15

A partnership must have more than one owner.

Question 16

Accounting communicates financial information about a business enterprise to both internal and external users.

Question 17

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

Question 18

A working knowledge of accounting is not relevant to a lawyer or an architect.

Question 19

The Financial Accounting Standards Board is a part of the Securities and Exchange Commission.

Question 20

The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar.

Question 21

Which of the following questions is asked by external users?

A) Is the company in which we invested making money?
B) Do we have enough money to pay our bills?
C) Should we eliminate any product lines?
D) Can we give our employees raises?

Question 22

Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs.

Question 23

Which of the following provides information primarily to external users?

A) Managerial accounting
B) Budgeting accounting
C) Financial accounting
D) Forecast accounting

Question 24

In the owner's equity statement, revenues are listed first, followed by expenses, and net income (or net loss).

Question 25

The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period.

Question 26

Communication of economic events is the part of the accounting process that involves

A) identifying economic events.
B) quantifying transactions into dollars and cents.
C) preparing accounting reports.
D) recording and classifying information.

Question 27

Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation.

Question 28

Financial statements are the major means of communicating accounting information to interested parties.

Question 29

Which of the following questions is asked by internal users?

A) Is the company in which we invested making money?
B) Which company deserves more investment?
C) Should we eliminate any product lines?
D) Will this company be able to pay us back if we loan to them?

Question 30

The starting point of the accounting process is

A) communicating information to users.
B) identifying economic events.
C) recording economic events.
D) None of the above answers are correct.

Question 31

Net income for the period is determined by subtracting total expenses and drawings from total revenues.

Question 32

The accounting process is correctly sequenced as

A) identification, communication, recording.
B) recording, communication, identification.
C) identification, recording, communication.
D) communication, recording, identification.

Question 33

The cost and fair market value of an asset are the same at the time of acquisition and in all subsequent periods.

Question 34

Which of the following is not an external user of accounting information?

A) production supervisor
B) creditor
C) investor
D) supplier

Question 35

Which of the following would not be considered an internal user of accounting data for the LMN Company?

A) President of the company
B) Production manager
C) Merchandise inventory clerk
D) President of the employees' labor union

Question 36

The study of accounting will be useful only if a student is interested in working for a profit-oriented business firm.

Question 37

Private accountants are accountants who are not employees of business enterprises.

Question 38

The Securities and Exchange Commission oversees U.S. financial markets and accounting standard-setting bodies.

Question 39

The accounting process involves all of the following except

A) identifying economic transactions that are relevant to the business.
B) communicating financial information to users by preparing financial reports.
C) recording nonquantifiable economic events.
D) analyzing and interpreting financial reports.

Question 40

Which of the following is not an internal user of accounting information?

A) production supervisor
B) creditor
C) marketing manager
D) finance director

Question 41

Which of the following is not an advantage of the corporate form of business organization?

A) Limited liability of stockholders
B) Transferability of ownership
C) Unlimited personal liability for stockholders
D) Unlimited life

Question 42

Internal users of accounting information include all of the following except

A) company officers.
B) investors.
C) marketing managers.
D) production supervisors.

Question 43

The proprietorship form of business organization

A) must have at least three owners in most states.
B) represents the largest number of businesses in the United States.
C) combines the records of the business with the personal records of the owner.
D) is characterized by a legal distinction between the business as an economic unit and the owner.

Question 44

A proprietorship is a business

A) owned by one person.
B) owned by two or more persons.
C) organized as a separate legal entity under state corporation law.
D) owned by a governmental agency.

Question 45

The first part of the accounting process is

A) communicating.
B) identifying.
C) processing.
D) recording.

Question 46

Keeping a systematic, chronological diary of events that are measured in dollars and cents is called

A) communicating.
B) identifying.
C) processing.
D) recording.

Question 47

Which of the following is an external user of accounting information?

A) Labor unions
B) Finance directors
C) Company officers
D) Managers

Question 48

Which of the following would not be considered an external user of accounting data for the LMN Company?

A) Internal Revenue Service Agent
B) Management
C) Creditors
D) Customers

Question 49

A small neighborhood barber shop that is operated by its owner would likely be organized as a

A) joint venture.
B) partnership.
C) corporation.
D) proprietorship.

Question 50

Which can have either one owner or thousands of owners?

A) Proprietorship
B) Corporation
C) Partnership
D) Proprietorship or partnership

Question 51

An accounting firm is an example of a

A) service company.
B) retail company.
C) merchandise company.
D) manufacturing company.

Question 52

The origins of accounting are generally attributed to the work of

A) Christopher Columbus.
B) Abner Doubleday.
C) Luca Pacioli.
D) Leonardo da Vinci.

Question 53

A business organized as a corporation

A) is not a separate legal entity in most states.
B) requires that stockholders be personally liable for the debts of the business.
C) is owned by its stockholders.
D) terminates when one of its original stockholders dies.

Question 54

Financial accounting provides economic and financial information for all of the following except

A) creditors.
B) investors.
C) managers.
D) other external users.

Question 55

Which of the following is not part of the accounting process?

A) Recording
B) Identifying
C) Financial decision-making
D) Communicating

Question 56

Which one of the following is not an external user of accounting information?

A) Regulatory agencies
B) Customers
C) Investors
D) All of these answers choices are external users.

Question 57

George and Ringo met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a

A) joint venture.
B) partnership.
C) corporation.
D) proprietorship.

Question 58

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

A) Identification
B) Communication
C) Recording
D) Analysis

Question 59

The partnership form of business organization

A) is a separate legal entity.
B) is a common form of organization for service-type businesses.
C) enjoys an unlimited life.
D) has limited liability.

Question 60

Which of the following would not be considered internal users of accounting data for a company?

A) The president of a company
B) The controller of a company
C) Creditors of a company
D) Salesmen of the company

Question 61

The Dulce Company has five plants nationwide that cost a total of $200 million. The current fair value of the plants is $600 million. The plants will be recorded and reported as assets at

A) $200 million.
B) $600 million.
C) $400 million.
D) $800 million.

Question 62

The economic entity assumption requires that the activities

A) of different entities can be combined if all the entities are corporations.
B) must be reported to the Securities and Exchange Commission.
C) of a sole proprietorship cannot be distinguished from the personal economic events of its owners.
D) of an entity be kept separate from the activities of its owner.

Question 63

The historical cost of an asset and its fair value are

A) never the same.
B) the same when the asset is sold.
C) irrelevant when the asset is used by the business in its operations.
D) the same on the date of acquisition.

Question 64

The private sector organization involved in developing accounting principles is the

A) Feasible Accounting Standards Body.
B) Financial Accounting Studies Board.
C) Financial Accounting Standards Board.
D) Financial Auditors' Standards Body.

Question 65

The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the

Question 66

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

A) The appointment of a new CPA firm to perform an audit
B) The purchase of a new computer
C) The sale of store equipment
D) Payment of income taxes

Question 67

GAAP stands for

A) Generally Accepted Auditing Procedures.
B) Generally Accepted Accounting Principles.
C) Generally Accepted Auditing Principles.
D) Generally Accepted Accounting Procedures.

Question 68

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the

A) stand-alone concept.
B) monetary unit assumption.
C) corporate form of ownership.
D) economic entity assumption.

Question 69

Sam Ryo is the proprietor (owner) of Sam's, a retailer of golf apparel. When recording the financial transactions of Sam's, Sam does not record an entry for a car he purchased for personal use. Sam took out a personal loan to pay for the car. What accounting concept guides Sam's behavior in this situation?

A) Pay back concept
B) Economic entity assumption
C) Cash basis concept
D) Monetary unit assumption

Question 70

Which of the following is true regarding the corporate form of business organization?

A) Corporations are the most prevalent form of business organization.
B) Corporate businesses are generally smaller in size than partnerships and proprietorships.
C) The revenues of corporations are greater than the combined revenues of partnerships and proprietorships.
D) Corporations are separate legal entities organized exclusively under federal law.

Question 71

The fair value principle is applied for

A) all assets.
B) current assets.
C) buildings.
D) investment securities.

Question 72

Generally accepted accounting principles are

A) income tax regulations of the Internal Revenue Service.
B) standards that indicate how to report economic events.
C) theories that are based on physical laws of the universe.
D) principles that have been proven correct by academic researchers.

Question 73

The first step in solving an ethical dilemma is to

A) identify and analyze the principal elements in the situation.
B) identify the alternatives.
C) recognize an ethical situation and the ethical issues involved.
D) weigh the impact of each alternative on various stakeholders.

Question 74

A business whose owners enjoy limited liability is a

A) proprietorship.
B) partnership.
C) corporation.
D) sole proprietorship.

Question 75

The SEC and FASB are two organizations that are primarily responsible for establishing generally accepted accounting principles. It is true that

A) they are both governmental agencies.
B) the SEC is a private organization of accountants.
C) the SEC often mandates guidelines when no accounting principles exist.
D) the SEC and FASB rarely cooperate in developing accounting standards.

Question 76

The historical cost principle requires that when assets are acquired, they are recorded at

A) appraisal value.
B) cost.
C) market price.
D) book value.

Question 77

The final step in solving an ethical dilemma is to

A) identify and analyze the principal elements in the situation.
B) recognize an ethical situation.
C) identify the alternatives and weigh the impact of each alternative on stakeholders.
D) recognize the ethical issues involved.

Question 78

Financial information that is capable of making a difference in a decision is

A) faithfully representative.
B) relevant.
C) convergent.
D) generally accepted.

Question 79

The primary accounting standard-setting body in the United States is the

A) Financial Accounting Standards Board.
B) International Accounting Standards Board.
C) Internal Revenue Service.
D) Securities and Exchange Commission.

Question 80

Ethics are the standards of conduct by which one's actions are judged as

A) right or wrong.
B) honest or dishonest.
C) fair or unfair.
D) All of these answer choices are correct.