ACCT 203: Ch 1 - Part 1 Review Questions

Identify the importance of accounting by selecting the statement(s) that is (are) correct below. Accounting information helps users make business and financial decisions. Accounting information is primarily used only at the end of a year when tax returns and financial statements are prepared. Accounting is a system that provides non-financial information to users.

Accounting information helps users make business and financial decisions.

Why does a business need accounting information? Accounting records business transactions and communicates financial information. Accounting accumulates passwords for security purposes. Accounting identifies personnel who do not have strong customer service skills. Accounting inspires management to work harder in order to climb the corporate ladder.

Accounting records business transactions and communicates financial information.

Identify the correct definition of an asset: An asset is something of value that a business owns or controls An asset is an amount owed to a creditor An asset refers to the claims of the owners

An asset is something of value that a business owns or controls

Identify the broad opportunity areas of accounting. (Check all that apply.) Public Financial Taxation Managerial Sales

Financial, Taxation, Managerial

Which statement below defines accounting? It identifies, records, and communicates business transactions. It is helpful in comparing the performance of one company against a competitor. It is essential to help make business decisions. It contains a record of all transactions that cannot be measured in monetary units.

It identifies, records, and communicates business transactions.

An employee that is having trouble paying his personal bills might exhibit the following fraud factor: Rationalization Opportunity Pressure

Pressure

All of the following are part of the FASB conceptual framework: (Select all that apply). Assumptions Principles Qualitative characteristics Recognition and measurement Elements Objectives

Qualitative characteristics Recognition and measurement Elements Objectives

Which of the statement(s) below define(s) an asset? (Check all that apply.) An amount owed to a creditor Resources with expected future benefits An amount owned Resources controlled by the business An amount owed to the owners

Resources with expected future benefits An amount owned Resources controlled by the business

What are Generally Accepted Accounting Principles? Regulations designed to promote strong ethical conduct. The concepts and rules that govern financial accounting practice. Regulations companies must follow in order to be publicly traded. Minimum requirements for becoming a CPA.

The concepts and rules that govern financial accounting practice.

Which of the following statements explain(s) how the accounting equation applies to businesses? Check all that apply. The equation states that Assets = Liabilities + Equity. The equation reflects the fact that, at any point in time, total revenues will always equal total liabilities and assets. The relation of assets, liabilities and equity is reflected in the equation. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners . The equation states that Revenues - Expenses = Assets. The equation applies to all transactions.

The equation states that Assets = Liabilities + Equity. The relation of assets, liabilities and equity is reflected in the equation. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The equation applies to all transactions.

Which of the following statements best represents the reason for the accounting equation? The owners' rights are equal to the creditors' rights. The equation may sometimes be out of balance at the end of a year. The equation monitors the legal agreements made with creditors and what is owed to them at any point in time. The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

The total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

The FASB conceptual framework consists of all of the following except: objectives elements qualitative characteristics concepts recognition and measurement

concepts

Generally accepted accounting principles (GAAP) wants information to have: (Check all that apply). faithful representation conceptual history relevance rules

faithful representation and relevance

Users of accounting information can be divided into two main groups. These groups include: customers and government top management and lower management internal and external sales staff and management

internal and external

The three factors that must exist for a person to commit fraud include

opportunity, pressure, rationalization