Deck 1: Introduction to Accounting and Business

Question 1

The basic difference between manufacturing and merchandising companies is the completion level of the products they purchase for resale to customers.

Answer 1

True

Question 2

The role of accounting is to provide many different users with financial information to make economic decisions.

Answer 2

True

Question 3

An example of a general-purpose financial statement would be a report about projected price increases related to transportation costs.

Answer 3

False

Question 4

A business is an organization in which basic resources or inputs, like materials and labor, are assembled and processed to provide outputs in the form of goods or services to customers.

Question 5

The main objective for all businesses is to maximize unrealized profits.

Question 6

Some of the major fraudulent acts by senior executives started as what they considered to be small ethical lapses which grew out of control.

Question 7

Proper ethical conduct implies that you only consider what's in your best interest.

Question 8

An example of an external user of accounting information is the federal government.

Question 9

The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities.

Question 10

Accounting information users need reports about the economic activities and condition of businesses.

Question 11

The Sarbanes-Oxley Act prohibits CPAs from providing nonaudit investment banking services.

Question 12

Managerial accounting information is used by external and internal users equally.

Question 13

Two factors that typically lead to ethical violations are relevance and timeliness of accounting information.

Question 14

The main objective of a not-for-profit business is to make a profit.

Question 15

Proprietorships are owned by one owner and provide only services to their customers.

Question 16

About 90% of the businesses in the United States are organized as corporations.

Question 17

Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.

Question 18

A corporation is a business that is legally separate and distinct from its owners.

Question 19

Only large companies such as Wal-Mart, JCP, General Motors, and the Bank of America can be organized as corporations.

Question 20

Senior executives cannot be criminally prosecuted for the wrong doings they commit on behalf of the companies where they work.

Question 21

Owners' rights to assets rank ahead of creditors' rights to assets.

Question 22

The cost concept is the basis for entering the exchange price into the accounting records.

Question 23

The rights or claims to the assets of a business may be subdivided into rights of creditors and rights of owners.

Question 24

If total assets decreased by $30,000 during a specific period and owner's equity decreased by $35,000 during the same period, the period's change in total liabilities was an $65,000 increase.

Question 25

If the liabilities owed by a business total $300,000 and owner's equity is equal to $300,000, then the assets also total $300,000.

Question 26

An account receivable is typically classified as a revenue.

Question 27

Generally accepted accounting principles regulate how and what financial information is reported by businesses.

Question 28

An account receivable is a claim against a customer arising from a sale on account.

Question 29

If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the same period, the period's change in total owner's equity was a $200,000 increase.

Question 30

Receiving payments on an account receivable increases both equity and assets.

Question 31

Cash dividends paid to stockholders decrease assets and increase equity.

Question 32

If a corporation had net income of $60,000 and $20,000 in cash dividends were declared and paid then the retained earnings account would increase by $40,000.

Question 33

No significant differences exist between the accounting standards issued by the FASB and the IASB.

Question 34

Purchasing supplies on account increases liabilities and decreases equity.

Question 35

The unit of measurement concept requires that economic data be recorded in a common unit of measurement.

Question 36

Paying an account payable increases liabilities and decreases assets.

Question 37

The accounting equation can be expressed as Assets - Liabilities = Owners' Equity.

Question 38

If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the buyer would record the building at $85,000.

Question 39

The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for developing accounting principles.

Question 40

Receiving a bill or otherwise being notified that an amount is owed is recorded until the amount is paid.

Question 41

An income statement is a summary of the revenues and expenses of a business as of a specific date.

Question 42

The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from income activities, and cash flows from equity activities.

Question 43

Profit is the difference between

A) assets and liabilities
B) the incoming cash and outgoing cash
C) the assets purchased with cash invested by stockholders and the cash spent to operate the business
D) the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services

Question 44

Which of the following would not normally operate as a service business?

A) pet groomer
B) restaurant
C) lawn care company
D) styling salon

Question 45

A retained earnings statement reports all changes in cash for a period of time.

Question 46

The balance sheet represents the accounting equation.

Question 47

Which of the following best describes accounting?

A) records economic data but does not communicate the data to users according to any specific rules.
B) is an information system that provides reports to users regarding economic activities and condition of a business.
C) is of no use by individuals outside of the business.
D) is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements.

Question 48

Net income and net profit do mean the same thing.

Question 49

Expenses are assets that are used up during the process of earning revenue.

Question 50

Which of the following group of companies are all examples of a merchandising business?

A) Delta Airlines, Marriott, Gap
B) Gap, Amazon, NIKE
C) GameStop, Sony, Dell
D) GameStop, Best Buy, Gap

Question 51

The excess of revenue over the expenses incurred in earning the revenue is called capital stock.

Question 52

Which of the following groups are considered to be internal usersof accounting information?

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

Question 53

The principal financial statements for a corporation are the income statement, the retained earnings statement, the balance sheet, and the budget.

Question 54

Two common areas of accounting that respectively provide information to internal and external users are

A) forensic accounting and financial accounting
B) managerial accounting and financial accounting
C) managerial accounting and environmental accounting
D) financial accounting and tax accounting systems

Question 55

All financial statements are identified by the name of the business, the title of the statement, and the date or period of time.

Question 56

Which of the following is a manufacturing business?

A) Amazon.com.
B) Wal-Mart.
C) Ford Motors.
D) Delta Airlines

Question 57

Revenue is earned only when money is received.

Question 58

Which type of accountant typically practices as an individual or as a member of a public accounting firm?

A) Certified Public Accountant
B) Certified Payroll Professional
C) Certified Internal Auditor
D) Certified Management Accountant

Question 59

Financial reports are used by

A) management
B) creditors
C) investors
D) all are correct

Question 60

All of the following are general-purpose financial statements except

A) balance sheet
B) income statement
C) retained earnings statement
D) cash budget

Question 61

The Sarbanes-Oxley Act of 2002 prohibits employment of auditors by their clients for what period after their last audit of the client?

A) indefinitely
B) one year
C) two years
D) none of these

Question 62

Most businesses in the United States are

A) proprietorships
B) partnerships
C) corporations
D) separate entities

Question 63

The initials GAAP stand for

A) General Accounting Procedures
B) Generally Accepted Plans
C) Generally Accepted Accounting Principles
D) Generally Accepted Accounting Practices

Question 64

For accounting purposes, the business entity should be considered separate from its owners if the entity is

A) a corporation
B) a proprietorship
C) a partnership
D) all of these

Question 65

Which of the following are guidelines for behaving ethically?

A) I and II.
B) II and III.
C) I and III.
D) I, II, and III.

Question 66

Countries outside the United States use financial accounting standards issued by the

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

Question 67

The business entity concept means that

A) the owner is part of the business entity
B) an entity is organized according to state or federal statutes
C) an entity is organized according to the rules set by the FASB
D) the entity is an individual economic unit for which data are recorded, analyzed, and reported

Question 68

Which of the following is not a role of accounting in business?

A) to provide reports to users about the economic activities and conditions of a business
B) to personally guarantee loans of the business
C) to provide information to other users to determine the economic performance and condition of the business
D) to assess the various informational needs of users and design its accounting system to meet those needs

Question 69

The following are examples of external users of accounting information except

A) government
B) customers
C) creditors
D) managers

Question 70

On April 25, Gregg Repair Service extended an offer of $115,000 for land that had been priced for sale at $140,000. On May 3, Gregg Repair Service accepted the seller's counteroffer of $127,000. On June 20, the land was assessed at a value of $88,000 for property tax purposes. On August 4, Gregg Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in Gregg Repair Service's records?

A) $115,000
B) $88,000
C) $140,000
D) $127,000

Question 71

Within the United States, the dominant body in the primary development of accounting principles is the

A) American Institute of Certified Public Accountants (AICPA)
B) American Accounting Association (AAA)
C) Financial Accounting Standards Board (FASB)
D) Institute of Management Accountants (IMA)

Question 72

Which of the following is the best description of accounting's role in business?

A) Accounting provides stockholders with information regarding the market value of the company's stocks.
B) Accounting provides information to managers to operate the business and to other users to make decisions regarding the economic condition of the company.
C) Accounting provides creditors and banks with information regarding the credit risk rating of the company.
D) Accounting is not responsible for providing any form of information to users. That is the role of the Information Systems Department.

Question 73

Managerial accountants would be responsible for providing which of the following?

A) Tax reports to government agencies.
B) Profit reports to owners and management.
C) Expansion of a product line report to management.
D) Consumer reports to customers.

Question 74

Due to various fraudulent business practices and accounting coverups in the early 2000's, Congress enacted the Sarbanes-Oxley Act of 2002. The Act was responsible for establishing a new oversight board for public accountants called the

A) Generally Accepted Accounting Practices for Public Accountants Board
B) Public Company Accounting Oversight Board
C) Congressional Accounting Oversight Board
D) none of these

Question 75

Which of the following isnot a characteristic of a corporation?

A) Corporations are organized as a separate legal taxable entity.
B) Ownership is divided into shares of stock.
C) Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D) A corporation's resources are limited to its individual owners' resources.

Question 76

Which of the following is true in regards to a Limited Liability Company?

A) Makes up 10% of business organizations in the United States.
B) Combines the attributes of a partnership and a corporation.
C) Provides tax and liability advantages to the owners.
D) All are correct.

Question 77

Which of the following is not a certification for accountants?

A) CIA
B) CMA
C) CISA
D) All are certifications.

Question 78

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a

A) proprietorship
B) corporation
C) partnership
D) governmental unit

Question 79

Which of the items below is not a business entity?

A) entrepreneurship
B) proprietorship
C) partnership
D) corporation

Question 80

Select the type of business that is most likely to obtain large amounts of resources by issuing stock.

A) partnership
B) corporation
C) proprietorship
D) none of these