Accounting Chapter 1 Test

Financial accounting

The field of accounting that focuses on providing information for external decision makers

A business can be organized as a sole proprietorship, partnership, corporation, or limited-liability company (LLC).

True

Accounting is referred to as the language of business because it is the method of communications business information to stockholders.

True

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

True

An examination of a company's financial statements and records is called an audit.

True

Any person or business to home of business owes money is called the business's creditor.

True

Different uses of financial statements focus on the different parts of the financial statements for the information they need.

True

International Financial Reporting Standards (IFRS) are the international accounting rules that U.S. companies must follow for their international operations.

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

Internal decision makers

Managerial accounting provides information to:

Customer

External user of a business' financial information.

Financial statements

Financial statements or document is there a report on a business in monetary terms, providing information to help people make informed business decisions.

A creditor is a person who owes money to the business.

False

A publicly traded company in the United States does not come on the SEC regulations as long as it follows the rules of GAAP.

False

As per the economic entity assumption, and organization and its owner should be seen as the same entity.

False

IFRS is the main U.S. Accounting rulebook and is currently created and governed and by the FASB.

False

In a limited-liability company (LLC), the members are personally liable for the debts of the business.

False

Certified public accountant

Professional accountant who serve the general public, not one particular company.

Company managers

Rely on management accounting information for decision-making purposes

Securities and Exchange Commission (SEC)

Requires publicly owned companies to be audited by independent accountants (CPAs)

Financial Accounting Standards Board

Responsible for the creation and give range of accounting standards in the United States.

Business owners use accounting information to set goals, evaluate progress towards those goals, and make adjustments when needed.

True

Financial accounting focuses on information for decision-making outside of the business, such as creditors and taxing authorities.

True

In a sole proprietorship, the owner is personally liable fir the debts of the business.

True

The guidelines for accounting information or called Generally Accepted Accounting Principles (GAAP).

True

Managerial accounting

The field of accounting that focuses on providing information for internal decision makers

Managerial accounting focuses on information for external decision makers.

False

Outside investors would ordinarily use managerial accounting information to decide whether or not to invest in a business.

False

Stockholders primarily use managerial accounting information for decision-making purposes.

False

The Sarbanes-Oxley Act (SOX)

Made it a criminal offense to falsify financial information