Deck 1: Accounting Principles and the Financial Statements

Question 1

A corporation is an economic unit that is legally separate from its owners.

Answer 1

True

Question 2

In general,one partner acting alone cannot obligate the partnership to another party.

Answer 2

False

Question 3

The day-by-day accumulation of interest is considered a transaction involving an exchange of value.

Answer 3

False

Question 4

The stockholders of a corporation elect the board of directors.

Question 5

Payment to a creditor is an example of a nonexchange business transaction.

Question 6

The personal resources of any partner can be called upon to pay the obligations of the partnership.

Question 7

The terms "bookkeeping" and "accounting" are not synonymous.

Question 8

The liability of corporate stockholders is limited to their percentage share of ownership.

Question 9

A partnership is dissolved when any partner leaves the business or dies.

Question 10

A company's management information system is a subsystem of its accounting information system.

Question 11

Sole proprietorships in the United States generate more business (in terms of receipts)than partnerships and corporations put together.

Question 12

Exchange rates for currency change daily according to the supply and demand for each currency.

Question 13

Corporations represent the largest number of businesses in the United States.

Question 14

Knowledge of the exchange rate is necessary to apply the money measure concept in case of international transactions.

Question 15

For reporting purposes,the personal assets and debts of a business owner should be combined with the assets and debts of the business.

Question 16

For accounting purposes,a business and its owner are considered the same entity.

Question 17

The processing stage of accounting is accomplished by the recording of data.

Question 18

When a corporate stockholder sells his or her shares of stock,the corporation is technically dissolved.

Question 19

Accountants focus on the needs for financial information by both internal and external decision makers.

Question 20

Accountants consider money the common unit of measure for all business transactions.

Question 21

Equity is reduced when owner's withdrawals exceed net income.

Question 22

Accounts Receivable is an asset that is considered nonmonetary in nature.

Question 23

Owner's equity equals cumulative net income or loss plus owner investments minus cumulative withdrawals.

Question 24

Creditors' equities is another term for liabilities.

Question 25

The purchase of land with cash would be disclosed on the statement of cash flows.

Question 26

Owner's equity equals assets minus liabilities.

Question 27

Net assets equal owner's equity.

Question 28

A proper heading for the income statement could include "For the Year Ended December 31,20--."

Question 29

The economic resources invested in a business by the owner are represented by owner's equity.

Question 30

The obligation to provide services to another entity is a type of liability.

Question 31

Owner withdrawals are an example of an expense.

Question 32

The expenses incurred by an accounting firm would appear on its balance sheet.

Question 33

If a company has suffered only net losses since its inception,the owner's equity account will always have a negative balance.

Question 34

Cash is another term for owner's equity.

Question 35

The account 'Wages Payable' would appear on the income statement.

Question 36

Inventory is an example of a nonmonetary asset.

Question 37

Financial position may be assessed by referring to a balance sheet.

Question 38

One way of stating the accounting equation is: Assets - Liabilities = Owner's Equity.

Question 39

Revenues have the effect of increasing owner's capital.

Question 40

Net income is another term for revenues.

Question 41

The purchase of equipment is an example of an investing activity.

Question 42

The balance sheet is also known as the statement of financial position.

Question 43

Companies whose securities are sold to the general public must adhere to standards established by the Securities and Exchange Commission.

Question 44

The Public Company Accounting Oversight Board (PCAOB)was created to determine the standards that auditors must follow.

Question 45

The account 'Supplies' will appear as an expense on the income statement.

Question 46

Objectivity is the avoidance of all relationships that impair or appear to impair the objectivity of the accountant.

Question 47

The statement of owner's equity relates the income statement to the balance sheet by showing how the owner's capital account changed during the accounting period.

Question 48

Both public accountants and management accountants are required to adhere to a code of professional conduct.

Question 49

The International Accounting Standards Board is the primary and most important determinant of generally accepted accounting principles.

Question 50

The statement of owner's equity discloses the owner's withdrawals made during the period.

Question 51

The Internal Revenue Service is responsible for issuing accounting standards for state and local governments.

Question 52

Due care means carrying out one's professional responsibilities with competence and diligence.

Question 53

The heading for a balance sheet might include the line "For the Month Ended December 31,20--."

Question 54

An increase in expenses will have the effect of reducing owner's equity.

Question 55

Generally accepted accounting principles encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.

Question 56

Accounting ratios are useful as management performance measures.

Question 57

The statement of cash flows discloses significant events related to the operating,investing,and financing activities of a business.

Question 58

Financial accounting information is used primarily by management.

Question 59

Independence means subordinating personal gain to service and the public trust.

Question 60

The board of directors appoints the audit committee,which in turn performs an independent audit of the company's records.

Question 61

Creditors are those who lend money to others or deliver goods and services before being paid.

Question 62

The primary external users of accounting information are investors and management.

Question 63

Buying and selling goods and services are examples of operating activities.

Question 64

Managerial accounting focuses on internal decision making.

Question 65

Liquidity means not having enough funds on hand to pay debts when they fall due.

Question 66

Not-for-profit organizations have no obligation to report their financial performance to outside parties.

Question 67

Paying taxes to the government is an example of an operating activity.

Question 68

The Federal Reserve Board is an example of a consumer group.

Question 69

The evaluation and interpretation of financial statements and related performance measures is called technical analysis.

Question 70

Less than 20 percent of the U.S.economy is generated by governmental and not-for-profit organizations.

Question 71

Taxing authorities are considered accounting information users with a direct financial interest.

Question 72

The intentional preparation of misleading financial statements is referred to as fraudulent financial reporting.

Question 73

Misleading financial reports are not considered fraudulent if they are the result of the misapplication of accounting principles.

Question 74

The Securities and Exchange Commission is an accounting information user with an indirect financial interest.

Question 75

A major function of financial accounting is to provide the investor with relevant and useful information.

Question 76

Two major goals of business are to achieve profitability and to achieve liquidity.

Question 77

Net income is a measure of profitability.

Question 78

Using cash to expand by purchasing land and a building is an example of an operating activity.

Question 79

Regulatory agencies are considered information users with an indirect financial interest.

Question 80

Financing a business means obtaining funds so the business can begin and continue operating.