Question 1

If assets are $300,000 and liabilities are $192,000, then equity equals:

Accepted Answer

A)  $492,000.
B)  $792,000.
C)  $108,000.
D)  $300,000.
E)  $192,000.F) B) and E)
G) B) and D)

Question 2

An accounting system captures relevant data about transactions and then classifies, records, and reports data.

Accepted Answer

A) True 
 B)False

Question 3

Explain why ethics are an integral part of accounting.

Accepted Answer

The purpose of accounting is to provide ...

Question 4

Financing activities provide the means organizations use to pay for resources such as land, buildings, and equipment.

Accepted Answer

A) True 
 B)False

Question 5

In a business decision where there are ethical concerns, the preferred course of action should be one that:

Accepted Answer

A)  Results in maintaining operations at the current level.
B)  Is agreed upon by the most managers.
C)  Avoids casting doubt on the decision maker and upholds trust.
D)  Maximizes the company's profits.
E)  Costs the least to implement.F) A) and C)
G) A) and D)

Question 6

The expense recognition principle, also called the matching principle:

Accepted Answer

A)  Provides guidance on when a company must recognize revenue.
B)  Prescribes that a company report the details behind financial statements that would impact users' decisions.
C)  Prescribes that accounting information is based on actual cost.
D)  Prescribes that a company record the expenses it incurred to generate the revenue reported.
E)  Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.F) B) and E)
G) B) and C)

Question 7

Which of the following combinations results in a net loss reported on the income statement?

Accepted Answer

A)  Total revenues of $70,000 and total expenses of $74,000.
B)  Total revenues of $80,000 and total expenses of $74,000.
C)  Total revenues of $40,000 and total expenses of $31,000.
D)  Total revenues of $20,000 and total expenses of $16,000.
E)  Total revenues of $60,000 and total expenses of $52,000.F) B) and E)
G) B) and D)

Question 8

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

Accepted Answer

A)  Assets decrease $1,300 and equity decreases $1,300.
B)  Assets increase $1,300 and liabilities decrease $1,300.
C)  Assets increase $1,300 and liabilities increase $1,300.
D)  One asset increases $1,300 and another asset decreases $1,300, causing no effect.
E)  Assets decrease $1,300 and equity increases $1,300.F) A) and D)
G) B) and E)

Question 9

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:

Accepted Answer

A)  Objectivity principle.
B)  Monetary unit assumption.
C)  Business entity assumption.
D)  Going-concern assumption.
E)  Measurement (Cost) Principle.F) All of the above
G) C) and D)

Question 10

The independent group that is attempting to harmonize accounting practices of different countries is the:

Accepted Answer

A)  CAP.
B)  IASB.
C)  SEC.
D)  AICPA.
E)  FASB.F) All of the above
G) A) and D)

Question 11

The cost-benefit constraint prescribes that only information with benefits of disclosure less than the costs of providing it, need be disclosed.

Accepted Answer

A) True 
 B)False

Question 12

Risk is the uncertainty about the return we will earn.

Accepted Answer

A) True 
 B)False

Question 13

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?

Accepted Answer

A)  $17,000.
B)  $71,000.
C)  $105,000.
D)  $88,000.
E)  $29,000.F) A) and B)
G) All of the above

Question 14

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Accepted Answer

A)  Protect the taxpayer by ending bailouts.
B)  Promote accountability and transparency in the financial system.
C)  All of the above.
D)  Put an end to the notion of "too big to fail."
E)  Protect consumers from abusive financial services.F) A) and E)
G) A) and C)

Question 15

The business entity assumption:

Accepted Answer

A)  Presumes that the life of a company can be divided into time periods, such as months and years, and that useful reports can be prepared for those periods.
B)  Means that we can express transactions and events in monetary, or money, units.
C)  Means that a business is accounted for separately from other business entities, including its owner.
D)  Prescribes that a company record the expenses it incurred to generate the revenue reported.
E)  Means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.F) A) and C)
G) A) and D)

Question 16

The financial statement that shows the beginning balance of owner's equity; the changes in equity that resulted from new investments by the owner, net income (or net loss) ; withdrawals; and the ending balance, is the:

Accepted Answer

A)  Statement of financial position.
B)  Statement of cash flows.
C)  Balance sheet.
D)  Statement of owner's equity.
E)  Income statement.F) A) and C)
G) A) and E)

Question 17

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 18

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

Accepted Answer

A) True 
 B)False

Question 19

The materiality constraint looks at both the importance and relative size of an amount.

Accepted Answer

A) True 
 B)False

Question 20

What is the balance sheet? What is its purpose?

Accepted Answer

The balance sheet is one of the four req...

Exam 1: Accounting in Business

The financial statement that shows the beginning balance of owner's equity; the changes in equity that resulted from new investments by the owner, net income (or net loss) ; withdrawals; and the ending balance, is the:

Correct AnswerverifiedShow Answer

In a business decision where there are ethical concerns, the preferred course of action should be one that:

Correct AnswerverifiedShow Answer

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

Correct AnswerverifiedShow Answer

The materiality constraint looks at both the importance and relative size of an amount.

Correct AnswerverifiedShow Answer

Risk is the uncertainty about the return we will earn.

Correct AnswerverifiedShow Answer

The cost-benefit constraint prescribes that only information with benefits of disclosure less than the costs of providing it, need be disclosed.

Correct AnswerverifiedShow Answer

External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles.

Correct AnswerverifiedShow Answer

The business entity assumption:

Correct AnswerverifiedShow Answer

The independent group that is attempting to harmonize accounting practices of different countries is the:

Correct AnswerverifiedShow Answer

An accounting system captures relevant data about transactions and then classifies, records, and reports data.

Correct AnswerverifiedShow Answer

Which of the following combinations results in a net loss reported on the income statement?

Correct AnswerverifiedShow Answer

Financing activities provide the means organizations use to pay for resources such as land, buildings, and equipment.

Correct AnswerverifiedShow Answer

The expense recognition principle, also called the matching principle:

Correct AnswerverifiedShow Answer

The statement of cash flows shows the net effect of revenues and expenses for a reporting period.

Correct AnswerverifiedShow Answer

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (or Dodd-Frank) to:

Correct AnswerverifiedShow Answer

If assets are $300,000 and liabilities are $192,000, then equity equals:

Correct AnswerverifiedShow Answer

A company's balance sheet shows: cash $22,000, accounts receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is the amount of owner's equity?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

What is the balance sheet? What is its purpose?

Correct AnswerverifiedThe balance sheet is one of the four req...View AnswerShow Answer

Explain why ethics are an integral part of accounting.

Correct AnswerverifiedThe purpose of accounting is to provide ...View AnswerShow Answer

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The balance sheet is one of the four req...
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The purpose of accounting is to provide ...
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