Deck 1: Accounting As a Form of Communication

Question 1

A partnership is a business owned by two individuals;if three or more individuals organize a business,it must be established as a corporation.

Answer 1

False

Question 2

Management accounting is the branch of accounting concerned with communication with internal management.

Answer 2

True

Question 3

An asset is a future economic benefit to a business.

Answer 3

True

Question 4

A department store is an example of a manufacturer.

Question 5

A grocery store is an example of a wholesaler.

Question 6

Bondholders are external users of a company's accounting information.

Question 7

An expense is an inflow of assets resulting from the sale of goods and services.

Question 8

An auto repair company is not an example of a manufacturer.

Question 9

Capital stock indicates the owners' contributions to a corporation.

Question 10

Since there is a lack of a profit motive in nonbusiness entities,they do not need information provided by an accounting system.

Question 11

Under Armour is an example of a service provider.

Question 12

The income statement is a statement that summarizes revenues and expenses for a period.

Question 13

The amount of earnings distributed to stockholders can be found in the income statement.

Question 14

Someone to whom a company has a debt is known as a creditor.

Question 15

The purpose of financial reporting is to provide economic information to external decision makers only.

Question 16

A partnership is a business owned by two or more individuals.

Question 17

The Internal Revenue Service (IRS)recognizes the separate existence of a proprietorship from its owner.

Question 18

Assets can be tangible or intangible in nature.

Question 19

Business entities and non-business entities are both organized to earn a profit.

Question 20

External users of accounting information include present and potential stockholders,bankers and other creditors,and management.

Question 21

The balance sheet is linked to the retained earnings statement by the ending retained earnings balance.

Question 22

Information must be timely to be relevant.

Question 23

The time period assumption assumes a company prepares financial statements every month.

Question 24

The International Accounting Standards Board (IASB)was created in order to develop worldwide accounting standards that must be used for all financial statements prepared regardless of country.

Question 25

The Financial Accounting Standards Board defined the objectives of financial reporting.

Question 26

According to the accounting profession,the purpose of financial reporting is to provide information about a company that investors,lenders,and other creditors can use when deciding whether to provide resources to the entity.

Question 27

The primary objective of external auditors is to provide assurance to stockholders and other users that the statements are fairly presented.

Question 28

The income statement is sometimes called the statement of financial position.

Question 29

The going concern assumption infers that a company will continue to operate until a known date.

Question 30

If a company prepares a statement of retained earnings,net income plus dividends are added to beginning retained earnings on this statement.

Question 31

A company in the process of liquidation meets the requirements under the going concern assumption.

Question 32

The IASB is a branch of the FASB.

Question 33

The term used to refer to an asset's original cost is "fair market value."

Question 34

Because market values are subjective,many assets are carried on the balance sheet at their acquisition cost.

Question 35

Profits from operating activities distributed to business owners are called dividends.

Question 36

GAAP stands for Generally Accepted Accounting Procedures.

Question 37

A balance sheet provides information during a period of time,while the other basic financial statements provide information on activities that occur over a point in time.

Question 38

When an entity's revenues exceed its expenses for a period of time,the entity will report net income.

Question 39

Owners' equity is the residual interest that remains after deducting liabilities from assets.

Question 40

Stockholders' equity is owners' equity in a corporation.

Question 41

Which of the following statements best describes the term "revenues"?

A)Revenues represent an outflow of assets resulting from the sale of goods or services.
B)Revenues represent the dollar amount of bonds sold to the public.
C)Revenues represent assets used or consumed in the sale of products or services.
D)Revenues represent assets received from the sale of products or services.

Question 42

The inflow of assets resulting from the sale of products and services is called a(n)

A)asset.
B)liability.
C)revenue.
D)expense.

Question 43

Which of the following statements is true regarding a bond?

A)​A bond is a certificate that acts as evidence of ownership in a corporation.
B)​A bond is a certificate that represents a corporation's promise to repay a certain amount of money and interest in the future.
C)If you buy a bond from a company,you are borrowing money from the company.
D)Bondholders receive dividends semiannually.

Question 44

Which of the following would be classified as external users of financial statements?

A)Stockholders and management of the company
B)The controller of the company and a company's stockholders
C)The company's marketing managers
D)The creditors and stockholders of the company

Question 45

Which one of the following business decisions will most likely require financial information?

A)The National Bank is reviewing the loan application from Petra's Restaurant.
B)Petra's Restaurant is attempting to sell its stock to the public.
C)The labor union representing Winn's Fitness Spa employees is negotiating a pay raise as part of a new labor agreement.
D)All of these choices

Question 46

All of the following are the types of activities that businesses engage in except

A)financing activities.
B)investing activities.
C)operating activities.
D)organizational activities.

Question 47

The costs of doing business through the sale of goods and services are called

A)net income.
B)expenses.
C)revenues.
D)dividends.

Question 48

Which of the following best describes the term "expenses"?

A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have in the business
C)The future economic resources of a business entity
D)The outflow of assets resulting from the sale of goods and services

Question 49

All of the following are examples of manufacturers except

A)Whirlpool.
B)Boeing.
C)Amazon.com.
D)Ford.

Question 50

Which one of the following events involves a liability for a business?

A)Loans to be repaid to banks
B)Inventories purchased for cash
C)Amounts invested by the owners
D)Stock sold to the general public

Question 51

Which of the following statements would be true if you own stock in a company?

A)You are an owner of the retained earnings and capital stock of the company.
B)You have a claim to the assets of the business.
C)You have the right to receive interest on an annual basis.
D)You have the right to a portion of the company's revenues each accounting period.

Question 52

United Airlines is an example of

A)producer.
B)supplier.
C)retailer.
D)service company.

Question 53

All of the following are examples of retailers except

A)Sports Authority.
B)Boeing.
C)Home Depot.
D)Best Buy.

Question 54

Which of the following is an organization that lends funds to a business entity and expects repayment of the funds?

A)A creditor
B)A stockholder
C)An owner
D)A partner

Question 55

Which of the following would be internal users of accounting information?

A)Customers and vendors
B)Employees and managers
C)Government and banks
D)Employees and customers

Question 56

Cross Country Busline is an example of a

A)producer.
B)supplier.
C)retailer.
D)service company.

Question 57

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

A)IRS
B)Company management
C)Creditors
D)Stockholders

Question 58

The three forms of business entities are

A)government,cooperatives,and philanthropic organizations.
B)financing,investing,and operating.
C)sole proprietorships,partnerships,and corporations.
D)wholesalers,manufacturers,and retailers.

Question 59

Which of the following best describes the term "assets"?

A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have in the business
C)The economic resources of a business entity
D)The cumulative profits earned by a business less any dividends distributed

Question 60

The outflow of assets resulting from the sale of products and services is called a(n)

A)asset.
B)liability.
C)revenue.
D)expense.

Question 61

How is the balance sheet linked to the other financial statements?

A)The amount of retained earnings reported on the balance sheet is equal to net income.
B)Retained earnings is added to total assets and reported on the balance sheet.
C)Net income increases retained earnings on the statement of retained earnings,which ultimately increases retained earnings on the balance sheet.
D)There is no link between the balance sheet and other statements,as each contains different accounts and provides different information.

Question 62

Clip Joint Company is ready to sell its bonds.Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?

A)How many product lines did Clip Joint Company have last year?
B)What will be Clip Joint Company's cost to start operations in another city?
C)How much debt does Clip Joint Company already have?
D)Will Clip Joint Company pay dividends?

Question 63

Which of the following best describes the term "retained earnings"?

A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have on the assets of the business
C)The future economic resources of a business entity
D)The cumulative profits earned by the business less any dividends distributed

Question 64

Which financial statement would you analyze to determine if a company distributed any of its profits to its shareholders?

A)Balance sheet
B)Statement of retained earnings
C)Income statement
D)Statement of cash flows

Question 65

What is the name of the branch of accounting concerned with providing managers and administrators with information to facilitate the planning and control of business operations?

A)Financial accounting
B)Auditing
C)Management accounting
D)Bookkeeping

Question 66

Which one of the following is not one of the three activities included in the definition of accounting?

A)Communicating
B)Identifying
C)Measuring
D)Operating

Question 67

Which one of the following is not an external user of financial statements?

A)Suppliers
B)Creditors
C)The company's controller
D)None of these choices

Question 68

Which of the following is the correct date format for the financial statement heading?

A)Balance sheet for the year ended June 30,2017
B)Income statement at December 31,2017
C)Balance sheet at December 31,2017
D)Statement of retained earnings at December 31,2017

Question 69

Which one of the following items is correct concerning the time element of financial statements?

A)The balance sheet covers a period of time.
B)The statement of retained earnings explains changes during a particular period.
C)An income statement lists amounts at a specific point in time.
D)Both the income statement and the balance sheet cover a period of time.

Question 70

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt.Which financial statement would provide you with information needed in order to evaluate your concern?

A)Income statement
B)Balance sheet
C)Statement of retained earnings
D)Statement of cash flows

Question 71

Which one of the following is least likely to be a user of financial information of a grocery store?

A)The manager of the grocery store
B)The supplier of milk to the grocery store
C)A stockbroker looking for a possible investment
D)A customer at the grocery store

Question 72

Which financial statement would you refer to in order to determine whether a company owed funds to creditors?

A)Statement of cash flows
B)Statement of retained earnings
C)Income statement
D)Balance sheet

Question 73

Which of the following represents the proper order of the financial decision framework?

A)Analyze the information,formulate the question,gather information from financial statements,monitor your decision,make the decision.
B)Formulate the question,analyze the information,gather information from financial statements,monitor your decision,make the decision.
C)Formulate the question,gather information from financial statements,analyze the information,make the decision,monitor your decision.
D)Analyze the information,monitor your decision,make the decision,formulate the question,gather information from financial statements.

Question 74

Which one of the following items appears on a balance sheet?

A)Accounts payable
B)Sales revenue
C)Utilities expense
D)Cost of goods sold

Question 75

Which one of the following business decisions will least likely require financial information?

A)The Gulf Coast Bank is reviewing the loan application from Tuo's Restaurant.
B)Tuo's Restaurant is attempting to sell its stock to the public.
C)The labor union representing Flaggler's Fitness Spa employees is negotiating a pay raise as part of a new labor agreement.
D)Tuo's Restaurant management is deciding whether to wash its catering vans today or tomorrow.

Question 76

Which of the following best describes the term "equity"?

A)The amount of total profits earned by a business since it began operations
B)The amount of interest or claim that the owners have in the business
C)The economic resources of a business entity
D)The cumulative profits earned by a business less any dividends distributed

Question 77

Which one of the following is a correct expression of the accounting equation?

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

Question 78

Which one of the following groups is considered an internal user of financial statements?

A)A bank reviewing a loan application from a corporation
B)The labor union representing employees of a company that is involved in labor negotiations
C)The financial analysts for a brokerage firm who are preparing recommendations for the firm's brokers on companies in a certain industry
D)Factory managers who supervise production line workers

Question 79

Which one of the following is an economic obligation for a business entity?

A)Salaries paid to employees for services rendered
B)Materials used in manufacturing products
C)Amounts owed to creditors
D)Payment of rent for the next year

Question 80

Which one of the following financial statements reports an entity's financial position at a specific date?

A)Balance sheet
B)Statement of retained earnings
C)Income statement
D)Both the income statement and the balance sheet