Deck 1: Accounting and Business

Question 1

Which of the following is not an objective of financial reporting specified in Concept Statement #1?

A)To provide information useful to investors and creditors
B)To provide information helpful in assessing the future amounts and timing of cash
Flows.
C)To provide information about the assets and claims on the assets of a firm.
D)To prepare income statements on a timely basis.

Answer 1

To prepare income statements on a timely basis.

Question 2

Limited liability is an attribute of which type of business entity?

A)partnership
B)sole proprietorship
C)service company
D)corporation

Answer 2

corporation

Question 3

Which type of business is required to pay taxes on income earned?

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

Answer 3

corporation

Question 4

The accounting concept requiring that the profits of a business be determined at regular intervals throughout the life of the business is the:

A)business entity concept
B)going concern concept
C)monetary unit concept
D)periodicity concept

Question 5

A business owned by two or more individuals whose personal possessions are at risk if the business fails is called a:

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

Question 6

The owner of a dry cleaning business maintains separate checkbooks for his business and his personal affairs.This best describes an application of the:

A)business entity concept
B)going concern concept
C)monetary unit concept
D)periodicity concept

Question 7

The accounting concept requiring that an accounting system reflect information relating only to those economic events pertaining to a particular entity is the:

A)business entity concept
B)going entity concept
C)monetary unit concept
D)periodicity concept

Question 8

Unlimited life is a characteristic of which type of business entity?

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

Question 9

Which type of business may be owned by one individual?

A)corporation
B)sole proprietorship
C)partnership
D)both a sole proprietorship and a corporation

Question 10

A business entity which is legally separate and distinct from its owners is called a:

A)corporation
B)sole proprietorship
C)partnership
D)service company

Question 11

A system used to identify,analyze,measure,record,summarize,and communicate relevant economic information to interested parties is referred to as a(n):

A)business system
B)management system
C)human resources system
D)accounting system

Question 12

Every three months,Ashmont Antiques produces a report showing profits earned during the most recently ended quarter.This best describes an application of the:

A)business entity concept
B)periodicity concept
C)monetary unit concept
D)going concern concept

Question 13

The We Build Anything Construction Company recently completed the construction of an office building that took 14 months to complete.Following the completion of this project the company began construction of a shopping center that took 15 months to complete.The company's financial statements were not prepared at the end of each of these projects but at the end of the fiscal year.This best describes an application of the:

A)business entity concept
B)periodicity concept
C)monetary unit concept
D)going concern concept

Question 14

According to Concept Statement #2 accounting information should be:

A)Relevant and Reliable
B)Responsible and Reconcilable
C)Accurate and Meaningful
D)Accurate and Timely

Question 15

In its annual report the FCX Company reported the value of its ending inventory,rather than the number of units on hand.This best describes an application of the:

A)business entity concept
B)going concern concept
C)monetary unit concept
D)periodicity concept

Question 16

Which of the following is an objective of financial reporting specified in Concept Statement #1?

A)To provide information useful to investors and creditors
B)To provide a statement of cash flows
C)To provide a balance sheet at the end of a year.
D)To prepare income statements on a timely basis.

Question 17

The accounting concept which asserts that money is the common measurement unit for economic activity is the:

A)business entity concept
B)monetary unit concept
C)going concern concept
D)dollar-value concept

Question 18

Limited liability means:

A)A company is only liable for an amount that is established by a pre-set limit.
B)Creditors are limited to just the cash available in the company at the time of the loss.
C)Creditors of a company can only claim the assets of the firm and not the assets of the owners of the firm.
D)Creditors of a firm can claim all the assets of a company but only a limited amount of the owner's personal assets.

Question 19

The accounting concept which assumes that,absent any information to the contrary,the business will continue into the foreseeable future is the:

A)business entity concept
B)future entity concept
C)going concern concept
D)periodicity concept

Question 20

A business owned by one person whose personal possessions are at risk if the business fails is called a:

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

Question 21

The organization responsible for setting U.S.external financial reporting practice is the:

A)Securities and Exchange Commission
B)Financial Accounting Standards Board
C)Federal Government
D)American Institute of Certified Public Accountants

Question 22

A company that makes and sells steel is a:

A)service firm
B)merchandising firm
C)manufacturing firm
D)performance firm

Question 23

The statements of financial accounting standards,and other authoritative pronouncements that define what constitutes acceptable accounting practice for financial reporting are collectively referred to as:

A)SFAS
B)FASB
C)SEC
D)GAAP

Question 24

A dry cleaning business is an example of a:

A)service firm
B)merchandising firm
C)manufacturing firm
D)distributor firm

Question 25

Which of the following computer assisted techniques test products before they are produced?

A)CAD
B)CAM
C)CIM
D)CPA

Question 26

An accountant who has the legal authority to attest to the fair presentation of information in the financial statements of any company is called a/an:

A)certified public accountant
B)internal auditor
C)controller
D)chief financial officer

Question 27

A company which produces a product from raw materials is called a:

A)service firm
B)merchandising firm
C)manufacturing firm
D)distributor firm

Question 28

Financial accounting standards that define what constitutes acceptable accounting practice for financial reporting world wide are referred to as:

A)SFAS
B)FASB
C)IFRS
D)GAAP

Question 29

Wal-Mart is an example of which of the following?

A)service firm
B)merchandising firm
C)manufacturing firm
D)producer firm

Question 30

Dell Corporation is an example of a:

A)service firm
B)merchandising firm
C)manufacturing firm
D)distributor firm

Question 31

The body responsible for establishing international accounting standards today is the:

A)FASB
B)GAAP
C)SEC
D)IASB

Question 32

Which of the following is not subject to double taxation?

A)Limited Liability Company
B)S Corporation
C)Limited Liability Partnership
D)Limited Partnership
E)All of the above are not subject to double taxation.

Question 33

Which of the following would best describe the type of business Disney operates?

A)Service
B)Service and Manufacturing
C)Service and Merchandising
D)Service,Merchandising,and Manufacturing

Question 34

A supermarket is an example of a:

A)merchandising firm
B)service firm
C)manufacturing firm
D)producer firm

Question 35

Which of the following business organizations has general partner(s)and limited partners that have limited liability?

A)Limited Liability Company
B)Limited Partnership
C)Limited Corporate Partnership
D)S Corporation

Question 36

IFRS are produced by:

A)International Accounting Standards Board
B)Securities and Exchange Commission
C)Financial Accounting Standards Board
D)International Accounting Committee

Question 37

Which of the following is has limited liability for all owners and is not subject to double taxation?

A)Corporation
B)Sole Proprietorship
C)Limited Liability Corporation
D)Limited Partnership

Question 38

A law firm is an example of which of the following?

A)manufacturing firm
B)merchandising firm
C)service firm
D)performance firm

Question 39

Which of the following best describes the type of business John Deere Inc is?

A)Manufacturing
B)Manufacturing and Service
C)Manufacturing and Merchandising
D)Manufacturing,Service and Merchandising

Question 40

IFRS stands for:

A)International Financial Reporting System
B)International Financial Reporting Standard
C)International Financing Requirement Standard
D)International Financing Regulation and Standards

Question 41

The function of business responsible for providing the information used by other functional areas to perform their jobs is referred to as:

A)production and operations
B)human resources
C)marketing
D)accounting and information systems

Question 42

Which of the following statements about the use of accounting information by the marketing function is false?

A)People in the marketing function use accounting information to help figure selling prices.
B)Accounting information would be needed to appraise different ways of getting the product to customers.
C)Those in the marketing function do not use accounting information; they leave all of that to their accountants.
D)Accounting information is needed for product-selection decisions.

Question 43

Which of the following is an example of a liability?

A)An amount which must be paid to a business that sold you some supplies
B)The obligation to transfer the net assets of the business to its owners
C)Equipment purchased by the business on a long-term payment plan
D)The amount contributed to the business by your partner

Question 44

Which of the following is not a liability from accounting purposes?

A)An amount which must be paid to a business that sold you some supplies
B)You promise to increase wages in the coming year by $1 per hour.
C)You borrow $100,000 to buy a new piece of equipment
D)Your workers have worked all week and you will pay them next Wednesday.

Question 45

All of the following are external stakeholders except:

A)employees
B)suppliers
C)customers
D)creditors

Question 46

Which of the following has the longest product life cycle?

A)Clothing style
B)Rap Music
C)Television Show
D)Theme Park

Question 47

Which of the following is an internal stakeholder in a college?

A)the company that employs graduates of the college
B)the company which services the photocopy machines in the library
C)the faculty
D)the organization that accredits various degree programs of the college

Question 48

All of the following are basic functions of a business except:

A)marketing
B)external auditing
C)finance
D)human resources

Question 49

The business function designed to determine the wants and needs of consumers is referred to as:

A)marketing
B)finance
C)human resources
D)operations

Question 50

Which of the following is an internal stakeholder?

A)general public
B)creditors
C)suppliers
D)management

Question 51

The business function which is responsible for managing a company's capital resources is referred to as:

A)marketing
B)human resources
C)finance
D)operations

Question 52

Which of the following statements about the use of accounting information by the human resources function is false?

A)People in human resources do not use accounting information; they leave all of that to their accountants.
B)Those in human resources use accounting information to figure employees' pay.
C)The computation of retirement benefits is a human resource function requiring accounting information.
D)Accounting information is needed to evaluate employees' performance.

Question 53

The primary objective of financial reporting is to

A)determine taxable income and income tax of a business.
B)provide management with information needed to run the day-to-day operations of a business.
C)keep businesses from going bankrupt.
D)provide information useful for making economic decisions.

Question 54

Which of the following led to the need for financial statements to report to owners of a business?

A)The abandonment of a barter economy
B)The expansion of European businesses into Asia and Africa
C)The absence of day-to-day involvement by owners
D)The increased use by business owners of the cash basis of accounting

Question 55

Which of the following is an external stakeholder in a supermarket?

A)the manager of the produce department
B)the company which supplies the baked goods for the bakery
C)the cashier at the checkout counter
D)the chief financial officer at the supermarket's corporate headquarters

Question 56

Which of the following is not a correct relationship?

A)Production Function - Determine Cost of Products Manufactured
B)Marketing Function - Advertising
C)Finance Function - Borrow Cash
D)Human Resource Function - Layoff Employees
E)All are correct relationship

Question 57

Which of the following has the shortest product life cycle?

A)Automobile
B)Game Show
C)Airplane
D)Wireless Communication

Question 58

Which of the following is not an example of a task performed by someone in the finance function?

A)Select projects for the firm to invest in
B)Decide between debt and equity financing of an acquisition
C)Decide when to raise new capital
D)Determine the percentage of defective products

Question 59

This computer assisted technique improves the speed and precision of the production process.

A)CAD
B)CAM
C)CIM
D)CAP

Question 60

The owner of XYZ Corporation includes his personal liabilities with business liabilities.What accounting concept is being violated?

A)Going concern
B)Business entity
C)Monetary unit
D)Periodicity

Question 61

Which of the following is the ratio for calculating the current ratio?

A)Current Assets / Current Liabilities
B)Current Assets / Total Liabilities
C)Current Liabilities / Current Assets
D)Current Assets / Total Sales

Question 62

Which of the following is the ratio for calculating the return on sales ratio?

A)Net Income / Total Stockholders' Equity
B)Current Assets / Total Sales
C)Current Liabilities / Total Sales
D)Net Income / Total Sales

Question 63

What distinguishes partnerships from sole proprietorships?

A)Involvement in day-to-day business activities by owners.
B)The extent of liability for the debts of the business
C)The amount of income tax the entity has to pay
D)Mutual agency (each partner can act for other partners)

Question 64

Which of the following explains why it is relatively easy for corporations to raise large amounts of money?

A)Owners have unlimited liability for the debts of the business.
B)Close supervision by owners of day-to-day operations
C)Corporations raise capital by seeking relatively small amounts from many people.
D)Corporations are not subject to as much regulation as partnerships and sole proprietorships.

Question 65

If the Debt to Equity Ratio is greater than 1 it means.

A)The company is using debt more than owners' equity to finance its assets
B)The company has less debt than equity
C)The company has more debt than assets
D)The company is using more of its assets to finance its debt

Question 66

Investors read the Independent Auditors' Opinion because.

A)they want to know if financial statements are mathematically correct
B)they want some assurance that the financial statements are fairly presented
C)they want to determine if the auditors found any fraud
D)they want to know if the auditor thinks the company is a good investment

Question 67

The Report of the Independent Auditor is the opinion of the CPA firm that examined the financial statements of a company and states which of the following?

A)The financial statements are correct as reported
B)The financial statements are fairly presented
C)The financial statements are free from fraud
D)The financial statements are presented fairly in accordance with GAAP.

Question 68

Which of the following is a characteristic of an S Corporation?

A)No taxation of income at the corporate level
B)Responsibility of owners for the firm's debt
C)Unlimited liability
D)Mutual agency

Question 69

Which of the following statements is true?

A)Before the advent of a money economy,the double-entry accounting system was not feasible.
B)Accounting systems developed in the 18^th century because,by then,most people were literate.
C)Double-entry accounting systems have existed for at least 2,000 years.
D)The double-entry accounting system came about as a result of the Great Depression.

Question 70

Which of the following is not a cause for the number of partnerships to be relatively small?

A)Unlimited liability
B)Mutual agency (each partner can act for other partners)
C)Double taxation
D)Difficulty of formation

Question 71

Which of the following is a characteristic of a limited-liability partnership (LLP)?

A)One partner cannot be held responsible for the inappropriate actions of another partner.
B)Partners' personal liability is limited to the amount they have invested in the business.
C)Each partner is liable for the actions of all other partners.
D)As a separate legal entity,the partnership must pay taxes on income.

Question 72

Which of the following is a characteristic of the corporate form of business?

A)Mutual agency
B)Separate legal entity
C)Relatively easy to form
D)Owners have unlimited liability for the debts of the business.

Question 73

One of the following is not one of the financial statements required for external reporting today.

A)Income Statement
B)Balance Sheet
C)Statement of Changes in Working Capital
D)Statement of Changes in Stockholders' Equity

Question 74

The Debt to Equity Ratio is measure with which of the following?

A)Total Liabilities / Total Assets
B)Long-term Liabilities / Total Stockholders' Equity
C)Total Stockholders' Equity / Total Liabilities
D)Total Liabilities / Total Stockholders' Equity

Question 75

The cash held by a company at the end of the year is found on which of the following two statements?

A)Balance Sheet and Income Statement
B)Balance Sheet and Statement of Cash Flows
C)Income Statement and Statement of Cash Flows
D)Statement of Stockholders' Equity and Cash Flows Statement

Question 76

For information to be useful,it must be relevant.Information is relevant when it

A)is verifiable.
B)causes users to reach a different decision.
C)mirrors the true economic situation of a business.
D)is understandable.

Question 77

Which of the following is NOT true about the relationship between the financial statements?

A)The net income of the firm is added to owners' equity
B)The cash on the balance sheet is found on the cash flow statement
C)The net income of the firm is reported on the Income Statement and the Statement of Changes in Shareholders' Equity
D)The cash generated by operations on the Statement of Cash Flows is reported as an increase in Retained Earnings on the Statement of Changes in Shareholders' Equity

Question 78

Net income is found on which of the following two statements?

A)Balance Sheet and Income Statement
B)Statement of Changes in Stockholders' Equity and Income Statement
C)Statement of Changes in Stockholders' Equity and Balance Sheet
D)Statement of Cash Flows and Balance Sheet

Question 79

The current liquidity of a company is measured by which of the following?

A)Return on Sales Ratio
B)Return on Assets Ratio
C)Current Ratio
D)Debt to Equity Ratio

Question 80

Which of the following is true about the relationships between the financial statements?

A)The ending balances of the retained earnings found in the Statement of Changes in Stockholders' Equity are found on the Balance Sheet.
B)The net income reported on the Income Statement is also found on the balance sheet.
C)The cash inflows identified on the Statement of Cash Flows are reported on the Income Statement.
D)The cash reported on the Income Statement is reported on the Statement of Cash Flows