Deck 1: Introduction to Accounting and Business

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

An account receivable is typically classified as a revenue.

Question 18

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

Question 19

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

Question 20

A business is an organization in where 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 21

Paying an account payable increases liabilities and decreases assets.

Question 22

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 23

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

Question 24

Revenue is earned only when money is received.

Question 25

Purchasing supplies on account increases liabilities and decreases equity.

Question 26

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

Question 27

If net income for a proprietorship was $50,000, the owner withdrew $20,000 in cash and the owner invested $10,000 in cash, the capital of the owner increased by $40,000.

Question 28

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

Question 29

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 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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 35

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

Question 36

Cash withdrawals by owners decrease assets and increase equity.

Question 37

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

Question 38

The principal financial statements of a proprietorship are the income statement, statement of owner's equity, and the balance sheet.

Question 39

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

Question 40

The owner's rights to the assets rank ahead of the creditors' rights to the assets.

Question 41

Net income and net profit do mean the same thing.

Question 42

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 43

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

Question 44

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

Question 45

The financial statements of a proprietorship should include the owner's personal assets and liabilities.

Question 46

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

Question 47

All of the following are general-purpose financial statements except:

A) balance sheet
B) income statement
C) statement of owner's equity
D) cash budget

Question 48

Most businesses in the United States are

A) proprietorships
B) partnerships
C) corporations
D) co-operatives

Question 49

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 50

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

Question 51

Which of the following is a manufacturing business?

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

Question 52

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 53

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 54

The balance sheet represents the accounting equation.

Question 55

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

Question 56

A statement of owner's equity reports the changes in the owner's equity for a period of time.

Question 57

Which of the items below is not a business entity?

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

Question 58

Financial reports are used by

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

Question 59

Profit is the difference between

A) assets and liabilities
B) the incoming cash and outgoing cash
C) the assets purchased with cash contributed by the owner 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 60

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 61

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 their individual owners' resources.

Question 62

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 63

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

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

Question 64

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 are correct.

Question 65

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 $125,000. On June 20, the land was assessed at a value of $95,000 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) $95,000
C) $140,000
D) $125,000

Question 66

Managerial accountants would be responsible for providing the following information:

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 67

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) There is no such prohibition.

Question 68

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 69

The objectivity concept requires that

A) business transactions must be consistent with the objectives of the entity
B) the Financial Accounting Standards Board must be fair and unbiased in its deliberations over new accounting standards
C) accounting principles must meet the objectives of the Security and Exchange Commission
D) amounts recorded in the financial statements must be based on independently verifiable evidence

Question 70

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 71

The following are examples of external users of accounting information except:

A) government
B) customers
C) creditors
D) all of the above

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 helps in decreasing the credit risk 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

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 the above

Question 74

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 75

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

A) Pet Groomers
B) Grocers
C) Lawn Care Company
D) Styling Salon

Question 76

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 77

The initials GAAP stand for

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

Question 78

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 are correct.

Question 79

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 80

Which of the following is not a certification for accountants?

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