ACCT Exam 1

true

Financing activities for corporations include borrowing money and selling shares of their own stock.

false

Investing activities involve collecting the necessary funds to support the business.

Both Jack and Jill are personally liable for the business debt.

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?

false

Management of a business enterprise is the major external user of information.

proprietorship and partnerships

Most business enterprises in the United States are

false

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

false

Net income is another term for revenue.

true

Operating activities involve putting the resources of the business into action to generate a profit.

false

Owners of business firms are the only people who need accounting information.

false

Payments to owners are operating activities.

false

Proprietorships in the United States generate more revenue than the other two forms of business enterprise.

false

The economic resources that are owned by a business are called stockholders' equity.

managers

The group of users of accounting information charged with achieving the goals of the business is its

true

The liability of corporate stockholders is limited to the amount of their investment.

false

The majority of U.S. business is transacted by proprietorships.

Both forecasts of cash needs and financial comparisons are internal reports.

Which of the following are internal reports that accounting provides to internal users?

favorable tax treatment

Which of the following is not an advantage of the corporate form of business organization?

true

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

false

The heading for the income statement might include the line "As of December 31, 20xx."

true

The information needs and questions of external users vary considerably.

is a common form of organization for service-type businesses.

The partnership form of business organization

true

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

generally receives favorable tax treatment relative to a corporation.

The proprietorship form of business organization

false

The purchase of equipment is an example of a financing activity.

true

Two primary external users of accounting information are investors and creditors.

Regulatory agencies

Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules?

Creditors

Which of the following groups uses accounting information to determine whether the company can pay its obligations?

Reduced legal liability for investors

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

Certifying the ethical accuracy of the financial information.

Which of the following is not a step for solving an ethical dilemma?

investors

Which of the following is not one of the three forms of business organization?

Managers who use accounting information to plan, organize, and run a business.

Which of the following is the best definition of an internal user of accounting information?

The information system that identifies, records, and communicates the economic events of an organization to interested users.

Which of the following is the most appropriate and modern definition of accounting?

The Act calls for decreased independence of outside auditors reviewing corporate financial statements.

Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)?

President of the employees' labor union

Which of the following would not be considered an internal user of accounting data for the Xanadu Company?

What average pay raise is affordable for employees this year?

Which one of the following questions is most likely asked by an internal human resources director for the company?

false

A business is usually involved in two types of activity—financing and investing.

is owned by its stockholders.

A business organized as a corporation

corporation

A business organized as a separate legal entity is a

false

A business organized as a separate legal entity owned by stockholders is a partnership.

Easier to transfer ownership and raise funds, no personal liability

A corporation has which of the following set of characteristics?

false

A different set of financial statements usually is prepared for each user.

The prestige of operating as a corporation

A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate?

proprietorship

A small neighborhood barber shop that is operated by its owner would likely be organized as a

transfer of ownership is easily achieved through stock sales.

All of the following are advantages for choosing a proprietorship for a business except

its ownership is easily transferable via the sale of shares of stock.

An advantage of the corporate form of business is that

true

Assets are resources owned by a business and provide future services or benefits to the business.

false

Cash is another term for stockholders' equity.

true

Corporate stockholders generally pay higher taxes but have no personal liability.

false

External users of accounting information are managers who plan, organize, and run a business.

taxing authorities.

External users of accounting information, like the Internal Revenue Service, are most commonly known as