Chapter 2 Quiz (Accounting )

T or F? A business is earning a profit if the selling price of its product covers the cost of the raw materials needed to make the product.

False

T or F? A business owner must always get permission to operate from the state government

False

T or F? All businesses set up their accounting systems in the same manner.

False

T or F? All types of businesses sell a product.

False

T or F? Basic accounting rules and procedures differ from business to business

False

T or F? Service businesses are not intended to operate at a profit.

False

T or F? The corporation is the easiest form of business to organize.

False

Which of the following would not be considered a service business? General Motors North American Van Lines Delta Air Lines Alamo Rent a Car

General Motors

Do you need permission from the government to start a business?

No

The amount of money earned after the costs of operating a business are paid is ________

Profit

T or F? A partnership can be owned by more than two individuals.

True

T or F? Corporations often start out as sole proprietorship or partnerships.

True

T or F? For accounting purposes, a business is an entity separate from its owners.

True

T or F? GAAP is a way to communicate financial information in a form understood by those interested in the operations and financial condition of the business.

True

T or F? In a free enterprise system, businesses compete for customers.

True

T or F? One advantage of owning your own business is that any financial gain from operating the business is yours

True

T or F? The life of a business is divided into specific periods for reporting purposes.

True

True or false? Only businesses that earn a profit will have the economic resources to continue to operate.

True

An example of an accounting assumption is ____

a business has the ability to operate indefinitely

The type of business that provides a product or a service, makes sales to customers, and incurs expenses is ____.

a service business a merchandising business a manufacturing business

In a business, it is the entrepreneur who ____.

is willing to take the risks to establish and organize the venture

Accounting is often call the "language of business" because ____.

it is fundamental to the communication of financial information

The most common form of business organization is the ____.

sole proprietorship

An example of an internal user of accounting information is ____.

the manager in charge of a specific product line

The most common time period covered by an accounting report is one ____.

year

The assumption that requires accounting reports to be prepared for a specific period of time is ____.

accounting period

To survive, a business must ____.

earn a profit and have someone willing to take the risk to run it