Deck 1: Accounting Concepts and Procedures: an Introduction

Question 1

The advantages of a limited company (corporation) do NOT include

A) limited personal risk.
B) can continue indefinitely.
C) business decisions made by career administrators.
D) easy to set up.

Answer 1

D

Question 2

Not-for-profit business are not permitted to earn any revenue.

Answer 2

False

Question 3

The Sarbanes-Oxley Act in the United States and National Policies in Canada were passed to

A) prevent fraud at public companies.
B) replace all of the old accounting procedures with new ones.
C) improve the accuracy of the company's financial reporting.
D) Both A and C are correct.

Answer 3

D

Question 4

Not-for-profit organizations

A) aim to improve society in some way.
B) seek to maximize profits.
C) usually obtain funding from donations and government grants.
D) Both A and C are correct.

Question 5

The primary objective of a not-for-profit business is to maximize revenue.

Question 6

Accounting reports are least helpful in answering which of the following questions?

A) How much cash was available at the end of the last year?
B) How well were the employees treated by management?
C) Did the company make a profit for the previous year?
D) Can the company pay its debts on time?

Question 7

The type of business organization that can continue indefinitely is known as a

A) sole proprietorship.
B) partnership.
C) corporation.
D) None of the above.

Question 8

Which of the following is a characteristic of a sole proprietorship?

A) Business owned by more than one person
B) Easy to form
C) Each stockholder acts as an owner of the company
D) Can continue indefinitely

Question 9

Generally Accepted Accounting Principles are the procedures and guidelines that must be followed during the accounting process.

Question 10

Which of the following professional accounting designations has been replaced by "CPA"?

A) CA
B) CMA
C) CGA
D) All of the above

Question 11

A partnership is a business which is

A) easy to form.
B) ends with the death of a partner.
C) owned by more than one person.
D) All of these answers are correct.

Question 12

The purpose of the accounting process is to provide financial information about

A) sole proprietorships.
B) small businesses.
C) large corporations.
D) All of these answers are correct.

Question 13

Accounting provides information to

A) managers.
B) government.
C) investors.
D) All of these answers are correct

Question 14

Which of the following is NOT a type of business organization?

A) Corporation
B) Partnership
C) Sole proprietorship
D) Operation

Question 15

A legal firm would be considered a

A) merchandise company.
B) manufacturer.
C) service company.
D) None of the above are correct.

Question 16

A corporation

A) can continue indefinitely.
B) is owned by stockholders.
C) has limited risk to stockholders.
D) all of the above.

Question 17

Which is an advantage of a sole proprietorship form of business?

A) There is limited personal risk.
B) The business can continue indefinitely.
C) The owner makes all the decisions.
D) All of these answers are correct.

Question 18

Bookkeeping is primarily

A) preparing financial reports.
B) analyzing the company's financial position.
C) record-keeping.
D) preparing tax reports.

Question 19

Putting the information into the accounting system would be called

A) analyzing.
B) recording.
C) classifying.
D) summarizing.

Question 20

The new accounting designation for Canada is CGA.

Question 21

A sample of a liability account is

A) Supplies.
B) Fees Earned.
C) Accounts Receivable.
D) Accounts Payable.

Question 22

A disadvantage of a corporation is that shareholders are held personally liable for the corporation's debts.

Question 23

If total liabilities increased by $16,000 and the assets increased by $20,000 during the accounting period, what is the change in the owner's equity amount?

A) Increase of $4,000
B) Decrease of $4,000
C) Increase of $20,000
D) Decrease of $16,000

Question 24

The purchase of supplies for cash would affect which account category?

A) Assets
B) Liabilities
C) Capital
D) Expense

Question 25

Bob Allen's Company sells for cash a machine it purchased last week for its cost of $15,000. This has the effect of

A) decreasing liabilities and increasing owner's equity.
B) decreasing assets and decreasing liabilities.
C) decreasing assets and increasing owner's equity.
D) no change to the overall accounting equation.

Question 26

An obligation that is payable to creditors is

A) an asset.
B) a liability.
C) the owner's equity.
D) an expense.

Question 27

List the 6 functions of accounting.

Question 28

What is the difference between Bookkeeping and Accounting?

Question 29

Which of the following is correct when speaking about a business's assets?

A) Assets are things of value owned.
B) Assets must always equal Liabilities.
C) Assets are shown at their current value.
D) Assets are disclosed on the Income Statement.

Question 30

The purpose of accounting is to provide decision-makers with useful, accurate information.

Question 31

Discuss the advantages and disadvantages of sole proprietorships, partnerships and corporations.

Question 32

Which of the following is NOT an asset?

A) Cash
B) Accounts Receivable
C) Accounts Payable
D) Truck

Question 33

Items owned by the business such as land, supplies and equipment are

A) assets.
B) liabilities.
C) owner's equity.
D) revenue.

Question 34

The claims of creditors against the assets of a business are

A) expenses.
B) revenues.
C) liabilities.
D) assets.

Question 35

The function of accounting includes analyzing, recording, classifying, summarizing, reporting, and interpreting financial information.

Question 36

J.R. Tenten's investment of cash and equipment in her existing business will

A) decrease assets and increase a liability.
B) increase assets and liabilities.
C) decrease assets and increase owner's equity.
D) increase assets and owner's equity.

Question 37

Which of the following would have claims against the assets of the business?

A) Cash and liabilities
B) Cash and Equipment
C) Equipment and liabilities
D) Liabilities and owner's equity

Question 38

A sole proprietorship ends with the death of the owner.

Question 39

Canada has not yet adopted the IFRS rules for accounting.

Question 40

The basic accounting equation is: Assets = Liabilities.

Question 41

Assets are equal to

A) liabilities + owner's equity.
B) liabilities - owner's equity.
C) liabilities - revenues.
D) revenues - expenses.

Question 42

Liam's Sporting Goods buys $35,000 of equipment on credit. Which of the following is a TRUE statement?

A) Total assets increase.
B) Total assets are unchanged.
C) Total liabilities decrease.
D) Total liabilities are unchanged.

Question 43

The purchase of equipment with both cash and on account was recorded as only a credit purchase. Due to this error

A) assets would be understated.
B) liabilities would be overstated.
C) owner's equity would be overstated.
D) None of the above are correct.

Question 44

If total liabilities are $3,000 and total assets are $10,000, owner's equity must be

A) $7,000.
B) $3,000.
C) $10,000.
D) $13,000.

Question 45

Stephanie purchased $10,000 of new electronic equipment for her DJ Company on account. The effect on the basic accounting equation was to

A) decrease Cash $10,000 and increase Equipment $10,000.
B) increase Equipment $10,000 and increase Accounts Payable $10,000.
C) decrease Cash $10,000 and increase Accounts Payable $10,000.
D) increase Cash $10,000 and increase Equipment $10,000.

Question 46

Eileen's Corner Shoppe purchases a new computer for cash. This causes

A) Cash and Capital to increase.
B) Computer Equipment and Cash to increase.
C) Computer Equipment to increase and Cash to decrease.
D) Accounts Payable to increase and Capital to increase.

Question 47

How does the purchase of equipment on account affect the accounting equation?

A) Assets increase; liabilities decrease.
B) Assets increase; owner's equity increases.
C) Assets increase; liabilities increase.
D) Liabilities increase; owner's equity decreases.

Question 48

A business paid $5,800 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to

A) increase one asset, decrease another asset.
B) increase an asset, increase a liability.
C) decrease an asset, decrease a liability.
D) increase an asset, increase owner's equity.

Question 49

If total assets are $30,000 and total liabilities are $8,000, Capital must equal

A) $22,000.
B) $38,000.
C) $8,000.
D) $30,000.

Question 50

If total liabilities are $22,000 and owner's equity is $17,000, the total assets must be

A) $39,000.
B) $5,000.
C) $20,000.
D) $17,000.

Question 51

The Owner's Equity of Leyla's Company is equal to one-quarter of the total assets. Liabilities equal $30,000. What is the amount of Owner's Equity?

A) $40,000
B) $10,000
C) $30,000
D) None of these answers are correct.

Question 52

Bianca's Beverages purchases $2,500 worth of office equipment on account. This causes

A) Cash and Capital to decrease.
B) Office Equipment and Accounts Payable to increase.
C) Office Equipment to decrease and Accounts Payable to increase.
D) Accounts Payable to increase and Capital to decrease.

Question 53

Kal's Vegan Restaurant, with total assets of $80,000, borrows $25,000 from the bank. Which of the following is a TRUE statement upon borrowing the money?

A) Total assets are now $105,000.
B) Total assets are now $80,000.
C) Total assets are now $25,000.
D) Total assets are now $55,000.

Question 54

Sunrise Company has total assets of $25,000. If $2,000 cash is used to purchase a new computer, the total assets would be

A) $25,000.
B) $23,000.
C) $27,000.
D) $22,000.

Question 55

The claims of creditors against the assets of a business are

A) expenses.
B) revenues.
C) liabilities.
D) owner's equity.

Question 56

Stork Machining has total assets of $40,000. What are the total assets if new equipment is purchased for $10,000 cash?

A) $50,000
B) $40,000
C) $55,000
D) $60,000

Question 57

An acceptable variation of the accounting equation is

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

Question 58

Sonya invested cash in her new business. What effect will this have?

A) Increase an asset and increase a liability.
B) Decrease an asset and increase a liability.
C) Increase an asset and increase owner's equity.
D) Increase an asset and decrease owner's equity.

Question 59

The basic accounting equation is

A) Assets = Revenues - Expenses.
B) Assets = Liabilities - Owner's Equity.
C) Assets = Owner's Equity - Liabilities.
D) Assets = Liabilities + Owner's Equity.

Question 60

Bob purchased a new computer for the company on account. The transaction will

A) increase Computer; increase Capital.
B) decrease Cash; increase Accounts Payable.
C) decrease Cash; increase Computer.
D) increase Computer; increase Accounts Payable.

Question 61

Which of the following would result if the business purchased supplies on credit?

A) Supplies would increase and Cash would decrease.
B) Supplies would increase and Capital would increase.
C) Supplies would increase and Accounts Payable would increase.
D) The purchase of supplies is not a business transaction.

Question 62

Which of the following would result if a business purchased Equipment paying a 50% down payment in cash?

A) Equipment would increase and Cash would decrease.
B) Accounts Payable would increase.
C) Since the equipment has not been paid in full, there is nothing to record.
D) Both A and B are correct.

Question 63

The left side of the accounting equation must always equal the right side of the equation.

Question 64

Creditors' claims against assets are called owner's equity.

Question 65

The accounting equation states that total assets must always equal total liabilities plus owner's equity.

Question 66

Cash is the same thing as Capital.

Question 67

The left side of the accounting equation shows what is owned by the business.

Question 68

In a shift of assets, the composition of the assets changes but total assets do not change.

Question 69

If the beginning capital was $14,000 and in a fiscal period there was revenue of $8,000, withdrawals of $3,000, and expenses of $1,500 then the ending capital would be

A) $26,500.
B) $23,500.
C) $17,500.
D) $20,500.

Question 70

A purchase of a vehicle for cash would have what affect on the accounting equation?

A) Total asset amount remains the same.
B) Total liabilities are overstated.
C) Total owner's equity is overstated.
D) Both A and B are correct.

Question 71

The payment of accounts payable would

A) increase both assets and liabilities.
B) increase assets and decrease liabilities.
C) decrease both assets and liabilities.
D) decrease assets and increase liabilities.

Question 72

The parties that have claims against the assets of the business are called creditors and owners.

Question 73

If the liabilities owed by a business total $150,000, then the assets must also total $150,000.

Question 74

The accounting equation states that total assets must always equal total liabilities plus owner's equity.

Question 75

Which of the following transactions would cause an asset to increase and the owner's equity to increase?

A) The owner invested cash in the business.
B) The business incurred an expense on credit.
C) The business bought supplies on account.
D) The owner withdrew cash from the business.

Question 76

If the assets owned by a business total $75,000, owner's equity must also total $75,000.

Question 77

If the assets owned by a business total $50,000 and liabilities total $30,000, then owner's equity totals $80,000.

Question 78

Which of the following would result if the owner invested cash in the business?

A) Cash would increase and Capital would decrease.
B) Cash would increase and Capital would increase.
C) Cash would decrease and Capital would increase.
D) An investment by the owner is not a business transaction.

Question 79

The cash purchase of a truck was recorded as a purchase on credit. This error would mean

A) assets were overstated.
B) liabilities were overstated.
C) Answers A and B are correct.
D) None of the above are correct.

Question 80

Which of the following transactions would cause one asset to increase and another asset to decrease?

A) The owner invested cash in the business.
B) The business paid a creditor.
C) The business bought inventory on credit.
D) The business bought supplies for cash.