Chapter 12 - Practice Quiz

The sum of all profits and losses, less all dividends paid since the beginning of the business is called owner's equity. retained earnings. net income. tax liability.

retained earnings.

Legal obligations to give up things of value in the future are known as assets. borrowings. liabilities. owner's equity.

liabilities

An accounting method that is specifically intended to be used for planning, directing, and controlling a business is called tax accounting. managerial accounting. financial accounting. forensic accounting.

managerial accounting.

Accounting is important for small businesses because investors will not even consider funding your concept unless you provide specific accounting information in an accepted format. true false

true

One of the difficulties in understanding and interpreting the income statements is the dispute over when one should recognize revenues. true false

true

Karla's Koffee shop has $70,000 in assets and $30,000 in liabilities. What is the owner's equity? $40,000 $100,000 $50,000 It is impossible to know the owner's equity as there is not enough information given.

$40,000

Which of the following is true of managerial accounting? It is used to produce tax returns and schedules. It is a rule-based system intended primarily for absentee owners. It is forward-looking in nature. It is primarily for bankers, investors, and regulators.

It is forward-looking in nature.

________ is a measure of how quickly a company can raise money through internal sources by converting assets to cash. Operating income Retained earnings Articulation Liquidity

Liquidity

Which of the following is a difficulty that arises in understanding and interpreting the income statements? There is difficulty deciding whether to report the revenues. There is difficulty deciding what should be considered as expenses. There are disputes over when to recognize revenues. There are disputes over the preferred tax rate to incorporate.

There are disputes over when to recognize revenues.

Which of the following statements is true about fixed costs? they can be assigned to a specific item sold or manufactured they are unaffected by changes in output they increase as the number of units produced increases they include expendables

they are unaffected by changes in output

________ is a formal, rule-based set of accounting principles and procedures intended for use by outside owners, investors, banks, and regulators. Tax accounting Managerial accounting Financial accounting Forensic accounting

Financial accounting

Which of the following statements is true regarding the balance sheet? values of long-lived assets reflect that asset's current value the original cost of long-lived assets is much higher than its current value it always contains exact amounts it's values are considered as historical values

it's values are considered as historical values