Deck 1: Accounting in Action

Question 1

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

Answer 1

True

Question 2

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

Answer 2

False

Question 3

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.

Answer 3

True

Question 4

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

A)Labor union
B)Finance director
C)Company officer
D)Manager

Question 5

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 6

A basic assumption of accounting assumes that the dollar is

A)unrelated to business transactions.
B)a poor measure of economic activities.
C)the common unit of measure for all business transactions.
D)useless in measuring an economic event.

Question 7

The basic accounting equation cannot be restated as

A)Assets - Liabilities = Stockholders' Equity.
B)Assets - Stockholders' Equity = Liabilities.
C)Stockholders' Equity + Liabilities = Assets.
D)Assets + Liabilities = Stockholders' Equity.

Question 8

If total liabilities increased by $8,000, then

A)assets must have decreased by $8,000.
B)stockholders' equity must have increased by $8,000.
C)assets must have increased by $8,000, or stockholders' equity must have decreased by $8,000.
D)assets and stockholders' equity each increased by $4,000.

Question 9

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000.During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000.The net income reported by Mofro's Computer Repair Shop for the year was

A)$100,000.
B)$150,000.
C)$200,000.
D)$250,000.

Question 10

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000.During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses.Stahl issued stock of $9,000 and paid dividends of $15,000 during the year.The stockholders' equity at the end of the year was

A)$33,000.
B)$54,000.
C)$57,000.
D)$63,000.

Question 11

Internal users of accounting information include all of the following except

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

Question 12

The internal control standards applicable to Sarbanes-Oxley apply to

A)all U.S.and international companies.
B)U.S.and international companies listed on U.S.exchanges.
C)International companies listed on U.S.exchanges.
D)U.S.companies listed on U.S.exchanges.
IFRS.

Question 13

Question 14

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

Question 15

The purchase of store equipment for cash reduces assets and stockholders' equity by an equal amount.

Question 16

External transactions involve economic events between the company and some other enterprise or party.

Question 17

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

A)Regulatory agency
B)Customer
C)Investor
D)All of these are external users.

Question 18

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 relies on FASB to develop accounting standards.
D)the SEC and FASB rarely cooperate in developing accounting standards.

Question 19

The assumption that the unit of measure remains relatively constant over time is part of the

A)economic entity assumption.
B)cost principle.
C)historical cost principle.
D)monetary unit assumption.

Question 20

Stockholders' equity is decreased by all of the following except

A)sales of stock.
B)net losses.
C)expenses.
D)dividends.

Question 21

Collection of a $1,000 Accounts Receivable

A)increases an asset $1,000; decreases an asset $1,000.
B)increases an asset $1,000; decreases a liability $1,000.
C)decreases a liability $1,000; increases stockholders' equity $1,000.
D)decreases an asset $1,000; decreases a liability $1,000.

Question 22

Mofro's Computer Repair Shop started the year with total assets of $300,000 and total liabilities of $200,000.During the year, the business recorded $500,000 in computer repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000.Mofro's stockholders' equity changed by what amount from the beginning of the year to the end of the year?

A)$100,000.
B)$150,000.
C)$200,000.
D)$250,000.

Question 23

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000.During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses.Stahl issued stock of $9,000 and paid dividends of $15,000 during
The year.The net income reported by Stahl Consulting for the year was:

A)$3,000.
B)$12,000.
C)$18,000.
D)$27,000.

Question 24

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

Question 25

The concern about international companies adopting SOX-type standards centers on

A)cost-benefit analysis.
B)ethics issues.
C)the governing authorities.
D)comparability.
IFRS.

Question 26

Compute the missing amount in each category of the accounting equation.

Question 27

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

Question 28

The purchase of office equipment on credit increases total assets and total liabilities.

Question 29

In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss).

Question 30

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

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

Question 31

GAAP stands for

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

Question 32

Owners enjoy limited liability in a

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

Question 33

A net loss will result during a time period when

A)liabilities exceed assets.
B)dividends exceed investments.
C)expenses exceed revenues.
D)revenues exceed expenses.

Question 34

Revenues are

A)the cost of assets consumed during the period.
B)gross increases in stockholders' equity resulting from business activities.
C)the cost of services used during the period.
D)actual or expected cash outflows.

Question 35

The balance sheet is frequently referred to as

A)an operating statement.
B)the statement of financial position.
C)the statement of cash flows.
D)the statement of retained earnings.

Question 36

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000.During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses.Stahl issued stock of $9,000 and paid dividends of $15,000 during the year.Stockholders' equity changed by what amount from the beginning of the year to the end of the year?

A)$3,000.
B)$9,000.
C)$12,000.
D)$45,000.

Question 37

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 38

Financial accounting ethics violations are

A)not a problem in the U.S.or internationally.
B)much more common in the U.S.than internationally.
C)much more common internationally than in the U.S.
D)a major problem both in the U.S.and internationally.
IFRS.

Question 39

A partnership must have more than one owner.

Question 40

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 41

Accountants refer to an economic event as a

A)purchase.
B)sale.
C)transaction.
D)change in ownership.

Question 42

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 43

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

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

Question 44

A problem with the monetary unit assumption is that

A)the dollar is not always stable over time.
B)the dollar has been stable over time.
C)the dollar is a common medium of exchange.
D)it is impossible to account for international transactions.

Question 45

If total liabilities increased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

A)$50,000 decrease
B)$10,000 decrease
C)$10,000 increase
D)$50,000 increase

Question 46

If an individual asset account is increased, then

A)there may be an equal decrease in a specific liability account.
B)there may be an equal decrease in stockholders' equity.
C)there may be an equal decrease in another asset account.
D)All of these answers are possible.

Question 47

The primary purpose of the statement of cash flows is to report

A)a company's investing transactions.
B)a company's financing transactions.
C)information about cash receipts and cash payments of a company.
D)the net increase or decrease in cash.

Question 48

During the year 2022, Dilego Company earned revenues of $90,000, had expenses of $56,000, purchased assets with a cost of $10,000 and paid dividends of $6,000.Net income for the year is

A)$18,000.
B)$24,000.
C)$28,000.
D)$34,000.

Question 49

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 50

IFRS, compared to GAAP, tends to be more

A)detailed.
B)rules-based.
C)principles-based.
D)full of disclosure requirements.
IFRS.

Question 51

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 52

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

Question 53

The starting point of the accounting process is

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

Question 54

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

A)creditors.
B)investors.
C)managers.
D)regulators.

Question 55

The Duce Company has five plants nationwide that cost a total of $100 million.The current fair value of the plants is $500 million.The plants will be recorded and reported at

A)$100 million.
B)$600 million.
C)$400 million.
D)$500 million.

Question 56

The common characteristic possessed by all assets is

A)long life.
B)great monetary value.
C)tangible nature.
D)future economic benefit.

Question 57

If total liabilities decreased by $30,000 and stockholders' equity increased by $20,000 during a period of time, then total assets must change by what amount and direction during that same period?

A)$50,000 decrease
B)$10,000 decrease
C)$10,000 increase
D)$50,000 increase

Question 58

If services are rendered on account, then

A)assets will decrease.
B)liabilities will increase.
C)stockholders' equity will increase.
D)liabilities will decrease.

Question 59

All of the financial statements are for a period of time except the

A)income statement.
B)retained earnings statement.
C)balance sheet.
D)statement of cash flows.

Question 60

At October 1, Arcade Fire Enterprises reported stockholders' equity of $70,000.During October, no stock was issued and the company earned net income of $18,000.If stockholders' equity at October 31 totals $78,000, what amount of dividends were paid during the month?

A)$0
B)$8,000
C)$10,000
D)$26,000

Question 61

A net loss will result during a time period when

A)assets exceed liabilities.
B)assets exceed stockholders' equity.
C)expenses exceed revenues.
D)revenues exceed expenses.

Question 62

GAAP, compared to IFRS, tends to be more

A)simple in accounting requirements.
B)rules-based.
C)principles-based.
D)simple in disclosure requirements.
IFRS.

Question 63

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

Question 64

The income statement is sometimes referred to as the statement of operations.

Question 65

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 66

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 67

The fair value principle is applied for

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

Question 68

Owner's equity is best depicted by the following:

A)Assets = Liabilities.
B)Liabilities + Assets.
C)Residual equity + Assets.
D)Assets - Liabilities.

Question 69

If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

A)$80,000 decrease
B)$20,000 decrease
C)$20,000 increase
D)$80,000 increase

Question 70

If expenses are paid in cash, then

A)assets will increase.
B)liabilities will decrease.
C)stockholders' equity will increase.
D)assets will decrease.

Question 71

The ending retained earnings amount is shown on

A)the balance sheet only.
B)the retained earnings statement only.
C)both the income statement and the retained earnings statement.
D)both the balance sheet and the retained earnings statement.

Question 72

At October 1, Arcade Fire Enterprises reported stockholders' equity of $72,000.During October, no stock was issued and the company posted a net loss of $8,000.If
Stockholders' equity at October 31 totals $64,000, what amount of dividends were paid
During the month?

A)$0
B)$4,000
C)$8,000
D)$16,000

Question 73

Bright Eyes Downtown Diner received a bill of $600 from the Jronand Wine Advertising Agency.The owner, A.A.Bondy, is postponing payment of the bill until a later date.The effect on specific items in the basic accounting equation is

A)a decrease in Cash and an increase in Accounts Payable.
B)a decrease in Cash and an increase in Retained Earnings.
C)an increase in Accounts Payable and a decrease in Retained Earnings.
D)a decrease in Accounts Payable and an increase in Retained Earnings.

Question 74

Proprietorships, partnerships, and corporations

A)are the three most common forms of business organizations in the U.S.
B)are the three most common forms of business organizations internationally.
C)are used in different proportions in different countries.
D)all of these answers are correct.
IFRS.

Question 75

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

Question 76

A balance sheet reports the assets and liabilities of a company for a specific period of time.

Question 77

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 78

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 79

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 80

The basic accounting equation may be expressed as

A)Assets = Equities.
B)Assets - Liabilities = Stockholders' Equity.
C)Assets = Liabilities + Stockholders' Equity.
D)All of these answers are correct.