ERP Chapter 1

Regarding liabilities, which of the following statements is incorrect? A. Liabilities represent one of the two claims to assets. B. A creditor who has loaned money to a business has a claim to some of the business's assets until the business pays the debt. C. Liabilities are economic resources that are expected to benefit the business in the future. D. Many, but not all, liabilities have the word payable in their titles.

C

Which of the following is included on the balance sheet? A. Revenues B. Expenses C. Assets D. Owner, Withdrawals

C

________ represents a short-term liability created by purchasing "on account." A. Accounts Receivable B. Notes Payable C. Accounts Payable D. Expenses

C

Regarding generally accepted accounting principles (GAAP), which of the following statements is incorrect? A. GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements, and implementation of financial statements. B. The primary objective of financial reporting is to provide information useful for making investment and lending decisions. C. Relevant information is complete, neutral, and free from error. D. GAAP is currently formulated by the Financial Accounting Standards Board.

C

Country Homes Company just recorded a transaction in its books. If this transaction increased the total liabilities by $16,000, then ________. A. assets must increase, or equity must decrease by $16,000 B. either assets or equity must decrease by $16,000 C. both assets and equity must each decrease by $8000 D. assets must decrease by $16,000

A

The amount of net income is transferred from ________ to ________. A. the income statement; the statement of owner's equity B. the balance sheet; the statement of cash flows C. the balance sheet; the income statement D. the income statement; the statement of expenditures

A

The field of accounting that focuses on providing information for internal decision makers is ________. A. managerial accounting B. financial accounting C. nonmonetary accounting D. governmental accounting

A

Which of the following financial statements would be most useful if an analyst wants to know the profitability of a company? A. income statement B. balance sheet C. statement of owner's equity D. statement of cash flows

A

________ represent the right to receive cash in the future from customers for goods sold or for services performed. A. Accounts Receivable B. Accounts Payable C. Equity D. Expenses

A

A debt that a business owes is called ________. A. an asset B. a liability C. owner's equity D. revenue

B

Spring Company has assets and equity that amount to $260,000 and $70,000, respectively. Liabilities total ________. A. $70,000 B. $190,000 C. $260,000 D. $330,000

B

The owner's claim to the assets of the business is called ________. A. return on assets B. expenses C. equity D. debt

C

Regarding the accounting equation, which of the following is a correct statement? A. The accounting equation is made up of three parts. B. The accounting equation is the basic tool of accounting. C. Assets - Liabilities = Equity. D. All of the statements are correct.

D

The assets of Star Company are $110,000 and the total liabilities are $10,000. The equity is ________. A. $110,000 B. $120,000 C. $10,000 D. $100,000

D

The equity of Alliance Company is $100,000 and the total liabilities are $10,000. The total assets are ________. A. $200,000 B. $20,000 C. $90,000 D. $110,000

D

Which of the following financial statements reports that total assets are equal to total liabilities plus total owner's equity? A. Statement of owner's equity B. Statement of cash flows C. Income statement D. Balance sheet

D

A payable is always a liability.

True

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers.

True

Economic resources and debts of the company are shown on the balance sheet.

True

Managerial accounting focuses on information needed by lenders, customers, and the federal government.

True

The Sarbanes-Oxley Act (SOX) requires companies to review internal control and take responsibility for the accuracy and completeness of their financial reports.

True

Which of the follow statements regarding the primary objective of financial reporting is correct? A. The primary objective of financial reporting is to provide information useful for the acquisition of long-term assets. B. Information that is faithfully represented is complete, neutral, and free from error. C. Relevant information ensures that users of the information will make the correct decisions. D. To be useful, information must follow the Generally Accepted Accounting Principles which are created and governed by the Securities and Exchange Commission.

B

Which of the following financial statements is used to report the economic resources, debt, and overall financial position of a company? A. income statement B. balance sheet C. statement of cash flows D. statement of owner's equity

B

Which of the following financial statements would be most useful if an analyst wants to know the likelihood of repayment of business debts? A. income statement B. balance sheet C. statement of owner's equity D. statement of cash flows

B

Which of the following is TRUE of assets? A. Assets include Cash, Merchandise Inventory, and Accounts Payable. B. Assets are something of value the business owns or controls. C. Assets do not need to provide future benefit to the business. D. Assets can be recorded at the market value if acquired at a bargain.

B

Which of the following is a decision made by an internal user? A. Should we lend money to the business? B. How much money should the business budget for production? C. Should I invest in the business? D. All of these are correct.

B

Which of the following is the correct accounting equation? A. Assets + Liabilities = Equity B. Assets = Liabilities + Equity C. Assets + Revenues = Equity D. Assets + Revenues = Liabilities + Expenses

B

The field of accounting that focuses on providing information for external decision makers is ________. A. managerial accounting B. financial accounting C. cost accounting D. nonmonetary accounting

B.

Which of the following formulae is used to calculate average total assets for the return on assets ratio? A. Average total assets = (Beginning total assets + Ending total assets) × 2 B. Average total assets = (Beginning total assets - Ending total assets) × 2 C. Average total assets = (Beginning total assets - Ending total assets) / 2 D. Average total assets = (Beginning total assets + Ending total assets) / 2

D

Which of the following statements is TRUE of an income statement? A. There is net income when total expenses are greater than total revenues. B. There is a net loss when total expenses are less than total revenue. C. There is a net loss when total expenses are greater than total liabilities. D. There is net income when total revenues are greater than total expenses.

D

GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________. A. Globally Accepted Accounting Policies B. Government Approved Accounting Principles C. Generally Accredited Accounting Policies D. Generally Accepted Accounting Principles

D.

The balance sheet helps analyze the business's performance in terms of profitability.

True

The balance sheet of a business summarizes an entity's revenues and expenses.

True