Chapter 1 (1-10) multiple choice

Which of the following is true? (a) FASB creates SEC. (b) GAAP creates FASB. (c) SEC creates CPA. (d) FASB creates GAAP.

FASB creates GAAP

Which of the following regarding GAAP is true? (a) GAAP is an abbreviation for generally applied accounting principles. (b) Changes in GAAP always affect the amount of income reported by a company. (c) GAAP is the abbreviation for generally accepted accounting principles. (d) Changes to GAAP must be approved by the Senate Finance Committee.

GAAP is the abbreviation for generally accepted accounting principles.

Which of the following would not be a goal of external users reading a company's financial statements? (a) Understanding the current financial state of the company. (b) Assessing the company's contribution to social and environmental policies. (c) Predicting the company's future financial performance. (d) Evaluating the company's ability to generate cash from sales.

assessing the company's contribution to social and environmental policies.

Which of the following regarding retained earnings is false? (a)Retained earnings is increased by net income. (b)Retained earnings is a component of stockholders' equity on the balance sheet. (c)Retained earnings is an asset on the balance sheet. (d)Retained earnings represents earnings not distributed to stockholders in the form of dividends.

retained earnings is an asset on the balance sheet

Which of the following is not one of the four basic financial statements? (a) the balance sheet (b) the audit report (c) the income statement (d) the statement of cash flows

the audit report

Which of the following is false regarding the balance sheet? (a)the accounts shown on a balance sheet represent the basic accounting equation for a particular business (b) the balance sheet reports the amount of assets, liabilities, and stockholders equity of a business at a point in time (c) the balance sheet summarizes the end changes in specific account balances over a period of time.

the balance sheet summarizes the end changes in specific account balances over a period of time.

Which of the following is not one of the items required to be shown in the heading of a financial statement? (a)The financial statement preparer's name. (b)The title of the financial statement. (c)The financial reporting date or period. (d)The name of the business entity.

the financial statement preparar's name

Which of the following is true regarding the income statement? (a) the income statement is sometimes called the statement of operations (b)the income statement reports revenue for which cash was received at the point of sale (c)the income statement reports revenues, expenses, and liabilites

the income statement is sometimes called the statement of operations

Which of the following statements regarding the statement of cash flows is false? (a) The statement of cash flows separates cash inflows and outflows into three major categories: operating, investing, and financing. (b) The ending cash balance shown on the statement of cash flows must agree with the amount shown on the balance sheet at the end of the same period. (c) The total increase or decrease in cash shown on the statement of cash flows must agree with the "bottom line" (net income or net loss) reported on the income statement. (d) The statement of cash flows covers a period of time.

the total increase or decrease in cash shown on the statement of cash flows must agree with the "bottom line" (net income or net loss) reported on the income statement

Which of the following is not required by the Sarbanes-Oxley Act? (a) Top managers of public companies must sign a report certifying their responsibilities for the financial statements. (b) Public companies must maintain an audited system of internal control to ensure accuracy in accounting reports. (c) Public companies must maintain an independent committee to meet with the company's independent auditors. (d) Top managers of public companies must be members of the American Institute of Certified Public Accountants.

top managers of public companies must be members of the American Institute of Certified Public Accountants