accounting TB ch1

.Which of the following events cannot be quantified into monetary units and recorded as an accounting transaction? a. The appointment of a new public accounting firm to perform an audit. b. The purchase of a new computer. c. The sale of store equipment. d. Payment of income taxes

A

Collection of a $1,500 Accounts Receivable a. increases an asset $1,500; decreases an asset $1,500. b. increases an asset $1,500; decreases a liability $1,500. c. decreases a liability $1,500; increases owner's equity $1,500. d. decreases an asset $1,500; decreases a liability $1,500.

A

Owner's capital at the end of the period is equal to a. owner's capital at the beginning of the period plus net income minus liabilities. b. owner's capital at the beginning of the period plus net income minus drawings. c. net income. d. assets plus liabilities

B

The starting point of the accounting process is a. communicating information to users. b. identifying economic events. c. recording economic events. d. None of these answers are correct

B

Accountants refer to an economic event as a a. purchase. b. sale. c. transaction. d. change in ownership.

C

Communication of economic events is the part of the accounting process that involves a. identifying economic events. b. quantifying transactions into dollars and cents. c. preparing accounting reports. d. recording and classifying information.

C

If total liabilities increased by €6,000, then a. assets must have decreased by €6,000. b. owner's equity must have increased by €6,000. c. assets must have increased by €6,000, or owner's equity must have decreased by €6,000. d. assets and owner's equity each increased by €3,000.

C

Net income results when a. Assets > Liabilities. b. Revenues = Expenses. c. Revenues > Expenses. d. Revenues < Expenses

C

Revenues are a. the cost of assets consumed during the period. b. gross increases in owner's equity resulting from business activities. c. the cost of services used during the period. d. actual or expected cash outflows.

C

Interpretation of reported information involves each of the following except a. limitations of reported data. b. meaning of reported data. c. uses of reported data. d. All of these choices are correct.

D

Activities of an entity must be kept separate from its owner's activities.

Economic Entity Assumption

Creditor and ownership claims against the assets of the business.

Equities

Consumption of assets or services

Expenses

Accounting information is used only by external users with financial interests in a business enterprise

F

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process

F

In order to possess future service potential, an asset must have physical substance

F

In the owner's equity statement, revenues are listed first, followed by expenses, and net income (or net loss).

F

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

F

Net income for the period is determined by subtracting total expenses and drawings from total revenues

F

Ownership is limited to one person.

Proprietorship

Offers expert accounting service to the general public

Public Accountant

Accountants record both internal and external transactions

T

Accounting communicates financial information about a business enterprise to both internal and external users

T

Financial statements are the major means of communicating accounting information to interested parties.

T

The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company during a period.

T

A common set of standards that provides guidelines to accountants in the United States and indicates how to report economic events, is called

generally accepted accounting principles GAAP

The .................. principle states that assets should be recorded at the value exchanged at the time the asset is acquired.

historical cost

Accountants who are employees of business enterprises are referred to as

private (or managerial) accountants.

Accounting is an information system that identifies, ................ , and ................... the economic events of an organization.

records , communicates

Drawings ................ owner's equity but are not expenses.

reduce