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