Accounting- Chapter1
The area of accounting aimed at serving the decision making needs of internal users is: A. Financial accounting. B. Managerial accounting. C. External auditing. D. SEC reporting. E. Bookkeeping.
b
The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the: A. Income statement equation. B. Accounting equation. C. Business equation. D. Return on equity ratio. E. Net income.
b
The statement of retained earnings: A. Reports how retained earnings changes at a point in time. B. Reports how retained earnings changes over a period of time. C. Reports on cash flows for operating, financing, and investing activities over a period of time. D. Reports on cash flows for operating, financing, and investing activities at a point in time. E. Reports on amounts for assets, liabilities, and equity at a point in time.
b
Technology: A. Has replaced accounting. B. Has not improved the clerical accuracy of accounting. C. Reduces the time, effort and cost of recordkeeping. D. In accounting has replaced the need for decision makers. E. In accounting is only available to large corporations.
c
All of the following are classified as liabilities except: A. Supplies. B. Bonds Payable. C. Wages Payable. D. Accounts Payable. E. Interest Payable.
A
The financial statement that identifies a company's cash receipts and cash payments over a period of time is the: A. Statement of financial position. B. Statement of cash flows. C. Balance sheet. D. Income statement. E. Statement of changes in stockholders' equity.
b
Another name for equity is: A. Net income. B. Expenses. C. Net assets. D. Revenue. E. Net loss.
c
Creditors' claims on the assets of a company are called: A. Net losses. B. Expenses. C. Revenues. D. Equity. E. Liabilities.
e
Ethical behavior requires that: A. Auditors' pay not depend on the success of the client's business. B. Auditors invest in businesses they audit. C. Analysts report information favorable to their companies. D. Managers use accounting information to benefit themselves. E. Auditors' pay depends on the success of the client's business.
A
The independent group that is attempting to harmonize accounting practices of different countries is the: A. AICPA. B. IASB. C. CAP. D. SEC. E. FASB.
B
All of the following regarding a Certified Public Accountant are true except: A. Must meet education and experience requirements. B. Must pass an examination. C. Must exhibit ethical character. D. May also be a Certified Management Accountant. E. Cannot hold any certificate other than a CPA.
E
A corporation is: A. A business legally separate from its owners. B. Controlled by the FASB. C. Not responsible for its own acts and own debts. D. The same as a limited liability partnership. E. Not subject to double taxation.
a
A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): A. Balance sheet. B. Income statement. C. Statement of cash flows. D. Statement of retained earnings. E. Financial Status Statement.
a
A limited partnership: A. Includes a general partner with unlimited liability. B. Is subject to double taxation. C. Has owners called stockholders. D. Is the same as a corporation. E. May only have two partners.
a
Resources a company owns or controls that are expected to yield future benefits are: A. Assets. B. Revenues. C. Liabilities. D. Stockholders' Equity. E. Expenses.
a
The International Accounting Standards Board (IASB): A. Hopes to create harmony among accounting practices of different countries to improve comparability. B. Is the government group that establishes reporting requirements for companies that issue stock to the investing public. C. Has the authority to impose its standards on companies around the world. D. Is the only source of generally accepted accounting principles (GAAP). E. Only applies to companies that are members of the European Union.
a
The question of when revenue should be recognized on the income statement according to GAAP is addressed by the: A. Revenue recognition principle. B. Going-concern assumption. C. Objectivity principle. D. Business entity assumption. E. Cost principle.
a
The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: A. Going-concern assumption. B. Business entity assumption. C. Objectivity principle. D. Cost Principle. E. Monetary unit assumption.
a
A company acquires equipment for $75,000 cash. This represents a(n): A. Operating activity. B. Investing activity. C. Financing activity. D. Revenue activity. E. Expense activity.
b
A partnership: A. Is also called a sole proprietorship. B. Has unlimited liability for its partners. C. Has to have a written agreement in order to be legal. D. Is a legal organization separate from its owners. E. Has owners called shareholders.
b
A resource that the stockholder receives from the company is called a(n): A. Liability. B. Dividend. C. Expense. D. Common stock. E. Investment.
b
An example of a financing activity is: A. Buying office supplies. B. Obtaining a long-term loan. C. Buying office equipment. D. Selling inventory. E. Buying land.
b
Assets created by selling goods and services on credit are: A. Accounts payable. B. Accounts receivable. C. Liabilities. D. Expenses. E. Equity.
b
Atkins Company collected $1,750 as payment for the amount owed by a customer from services provided the prior month on credit. How does this transaction affect the accounting equation for Atkins? A. Assets would decrease $1,750 and liabilities would decrease $1,750. B. One asset would increase $1,750 and a different asset would decrease $1,750, causing no effect. C. Assets would increase $1,750 and equity would increase $1,750. D. Assets would increase $1,750 and liabilities would increase $1,750. E. Liabilities would decrease $1,750 and equity would increase $1,750.
b
Grandmark Printing pays $2,000 rent to the landlord of the building where its facilities are located. How does this transaction affect the accounting equation for Grandmark? A. Assets would decrease $2,000 and liabilities would decrease $2,000. B. Assets would decrease $2,000 and equity would decrease $2,000. C. Assets would increase $2,000 and equity would increase $2,000. D. Assets would increase $2,000 and liabilities would increase $2,000. E. Liabilities would decrease $2,000 and equity would increase $2,000.
b
Increases in equity from a company's sales of products or services are: A. Assets. B. Revenues. C. Liabilities. D. Stockholders' Equity. E. Expenses.
b
Operating activities: A. Are the means organizations use to pay for resources like land, buildings and equipment. B. Involve using resources to research, develop, purchase, produce, distribute and market products and services. C. Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services. D. Are also called asset management. E. Are also called strategic management.
b
Rent expense appears on which of the following statements? A. Balance sheet. B. Income statement. C. Statement of retained earnings. D. Statement of periodic expenses. E. Statement of cash flows only.
b
The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: A. Time-period assumption. B. Business entity assumption. C. Going-concern assumption. D. Revenue recognition principle. E. Cost principle.
b
The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the: A. Accounting equation. B. Cost principle. C. Going-concern assumption. D. Realization principle. E. Business entity assumption.
b
The primary objective of financial accounting is to: A. Serve the decision-making needs of internal users. B. Provide accounting information that serves external users. C. Monitor and control company activities. D. Provide information on both the costs and benefits of looking after products and services. E. Know what, when, and how much product to produce.
b
The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the: A. APB. B. FASB. C. AAA. D. AICPA. E. SEC.
b
U.S. government bonds are: A. High-risk and high-return investments. B. Low-risk and low-return investments. C. High-risk and low-return investments. D. Low-risk and high-return investments. E. High-risk and no-return investments.
b
Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported? A. Going-concern assumption. B. Matching principle. C. Cost principle. D. Business entity assumption. E. Consideration assumption.
b
A balance sheet lists: A. The types and amounts of the revenues and expenses of a business. B. Only the information about what happened to equity during a time period. C. The types and amounts of assets, liabilities, and equity of a business as of a specific date. D. The inflows and outflows of cash during the period. E. The assets and liabilities of a company but not the retained earnings.
c
All of the following are true regarding ethics except: A. Ethics are beliefs that separate right from wrong. B. Ethics rules are often set for CPAs. C. Ethics do not affect the operations or outcome of a company. D. Are critical in accounting. E. Ethics can be difficult to apply.
c
An example of an investing activity is: A. Paying wages of employees. B. Dividends paid by the company. C. Purchase of land. D. Selling inventory. E. Contributions from stockholders.
c
An exchange of value between two entities that yields a change in the accounting equation is called: A. The accounting equation. B. Recordkeeping or bookkeeping. C. An external transaction. D. An asset. E. Net Income.
c
Contessa Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are: A. Total assets decrease and equity increases. B. Both total assets and total liabilities decrease. C. Neither assets, total liabilities, nor equity are changed. D. Both total assets and equity are unchanged and liabilities increase. E. Total assets increase and equity decreases.
c
External users of accounting information include all of the following except: A. Shareholders. B. Customers. C. Purchasing managers. D. Government regulators. E. Creditors.
c
Risk is: A. Net income divided by average total assets. B. The reward for investment. C. The uncertainty about the return expected to be earned. D. Unrelated to return expected. E. Derived from the idea of getting something back from an investment.
c
Net Income: A. Decreases equity. B. Represents the amount of assets stockholders put into a business. C. Equals assets minus liabilities. D. Is the excess of revenues over expenses. E. Represents stockholders' claims against assets.
d
Revenue is properly recognized: A. When the customer makes an order. B. Only if the transaction creates an account receivable. C. At the end of the accounting period. D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. E. When cash from a sale is received.
d
Revenues are: A. The same as net income. B. The excess of expenses over assets. C. Resources owned or controlled by a company. D. The increase in equity from a company's sales of products and services. E. The costs of assets or services used.
d
Which of the following purposes would financial statements serve for external users? A. To find information about projected costs and revenues of proposed products. B. To assess employee performance and compensation. C. To assist in monitoring consumer needs and price concerns. D. To fulfill regulatory requirements for companies whose stock is sold to the public. E. To determine purchasing needs.
d
A company borrows $125,000 from the Northern Bank and receives the loan proceeds in cash. This represents a(n): A. Revenue activity. B. Operating activity. C. Expense activity. D. Investing activity. E. Financing activity.
e
In a business decision where there are ethical concerns, the preferred course of action should be one that: A. Is agreed upon by the most managers. B. Maximizes the company's profits. C. Results in maintaining operations at the current level. D. Costs the least to implement. E. Avoids casting doubt on the decision maker and upholds trust.
e
The basic financial statements include all of the following except: A. Balance Sheet. B. Income Statement. C. Statement of Retained Earnings. D. Statement of Cash Flows. E. Statement of Changes in Assets.
e
Accounts payable appear on which of the following statements? A. Balance sheet. B. Income statement. C. Statement of retained earnings. D. Statement of cash flows. E. Transaction statement.
a
An example of an operating activity is: A. Paying wages. B. Purchasing office equipment. C. Borrowing money from a bank. D. Selling stock. E. Paying off a loan.
a
Distributions of cash or other resources by a business to its stockholders are called: A. Dividends. B. Expenses. C. Assets. D. Retained earnings. E. Net Income.
a
The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Revenue recognition principle.
c
The accounting equation for Long Company shows an increase in its assets and an increase in its liabilities. Which of the following transactions could have caused that effect? A. Cash was received from providing services to a customer. B. Cash was received in exchange for common stock. C. Equipment was purchased on credit. D. Supplies were purchased for cash. E. Advertising expense for the month was paid in cash.
c
The conceptual framework that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are attempting to converge and enhance includes the following broad areas to guide standard setting except: A. Objectives B. Qualitative characteristics C. Uniformity D. Elements E. Recognition and measurement
c
The difference between a company's assets and its liabilities, or net assets is: A. Net income. B. Expense. C. Equity. D. Revenue. E. Net loss.
c
The income statement reports all of the following except: A. Revenues earned by a business. B. Expenses incurred by a business. C. Assets owned by a business. D. Net income or loss earned by a business. E. The time period over which the earnings occurred.
c
The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the: A. Going-concern assumption. B. Cost principle. C. Revenue recognition principle. D. Objectivity principle. E. Business entity assumption.
c
To include the personal assets and transactions of a business's stockholders in the records and reports of the business would be in conflict with the: A. Objectivity principle. B. Monetary unit assumption. C. Business entity assumption. D. Going-concern assumption. E. Revenue recognition principle.
c
When expenses exceed revenues, the resulting change in equity is: A. Net assets. B. Negative equity. C. Net loss. D. Net income. E. A liability.
c
Which of the following accounting principles require that all goods and services purchased be recorded at actual cost? A. Going-concern assumption. B. Matching principle. C. Cost principle. D. Business entity assumption. E. Consideration assumption.
c
Accounting is an information and measurement system that does all of the following except: A. Identifies business activities. B. Records business activities. C. Communicates business activities. D. Eliminates the need for interpreting financial data. E. Helps people make better decisions.
d
Billington Corp. borrows $80,000 cash from Second National Bank. How does this transaction affect the accounting equation for Billington? A. Assets would decrease $80,000 and liabilities would decrease $80,000. B. Assets would decrease $80,000 and equity would increase $80,000. C. Assets would increase $80,000 and equity would decrease $80,000. D. Assets would increase $80,000 and liabilities would increase $80,000. E. Liabilities would decrease $80,000 and equity would increase $80,000.
d
Decreases in equity that represent costs of providing products or services to customers, used to earn revenues are called: A. Liabilities. B. Equity. C. Dividends. D. Expenses. E. Common Stock.
d
If Houston Company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and: A. Accounts payable decreases $10,000. B. Accounts payable increases $10,000. C. Cash increases $10,000. D. Revenue increases $10,000. E. Revenue decreases $10,000.
d
If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation when the first rent payment is collected? A. Assets would decrease $700 and liabilities would decrease $700. B. Assets would decrease $700 and equity would increase $700. C. Assets would increase $700 and equity would decrease $700. D. Assets would increase $700 and equity would increase $700. E. Liabilities would decrease $700 and equity would increase $700.
d
If the liabilities of a business increased $75,000 during a period of time and the stockholders' equity in the business decreased $30,000 during the same period, the assets of the business must have: A. Decreased $105,000. B. Decreased $45,000. C. Increased $30,000. D. Increased $45,000. E. Increased $105,000.
d
Marsha Bogswell is the owner of Bogswell Legal Services, Inc. Which accounting principle requires Marsha to keep her personal financial information separate from the financial information of Bogswell Legal Services, Inc.? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Matching principle.
d
The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the: A. Balance sheet. B. Statement of retained earnings. C. Statement of cash flows. D. Income statement. E. Statement of financial position.
d
The statement of cash flows reports all of the following except: A. Cash flows from operating activities. B. Cash flows from investing activities. C. Cash flows from financing activities. D. The net increase or decrease in assets for the period reported. E. The net increase or decrease in cash for the period reported.
d
On December 15 of the current year, Conrad Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. Which accounting principle would require Conrad Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Revenue recognition principle.
e
The accounting concept that requires financial statement information to be supported by independent, unbiased evidence is: A. Business entity assumption. B. Revenue recognition principle. C. Going-concern assumption. D. Time-period assumption. E. Objectivity principle.
e
The accounting equation for Ying Company shows a decrease in its assets and a decrease in its equity. Which of the following transactions could have caused that effect? A. Cash was received from providing services to a customer. B. The company paid an amount due on credit. C. Equipment was purchased for cash. D. A utility bill was received for the current month, to be paid in the following month. E. Advertising expense for the month was paid in cash.
e
The financial statement that shows the beginning balance of retained earnings; the changes in retained earnings that resulted from, net income (or net loss); dividends; and the ending balance, is the: A. Statement of financial position. B. Statement of cash flows. C. Balance sheet. D. Income statement. E. Statement of retained earnings.
e
Which of the following accounts is not included in the calculation of a company's ending stockholders' equity? A. Revenues. B. Expenses. C. Dividends. D. Common stock. E. Cash.
e
