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Exam 1: Accounting in Business

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Question 61

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The materiality constraint:

A) Prescribes that accounting information is based on actual cost.
B) Provides guidance on when a company must recognize revenue.
C) Prescribes that only information that would influence the decisions of a reasonable person need be disclosed.
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 B)
G) A) and D)

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Question 62

Multiple Choice

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Creditors' claims on the assets of a company are called:

A) Net losses.
B) Expenses.
C) Revenues.
D) Equity.
E) Liabilities.

F) All of the above
G) A) and B)

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Question 63

Multiple Choice

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Which of the following accounts is not included in the asset section of the balance sheet?

Decreases in equity from costs of providing products or services to customers are called:

The accounting equation implies that: Assets + Liabilities = Equity.

Liabilities are owners' claims on assets.

Dawson Electronic Services had revenues of $80,000 and expenses of $50,000 for the year.Its assets at the beginning of the year were $400,000.At the end of the year assets were worth $450,000.Calculate its return on assets.

The International Accounting Standards Board (IASB)issues International Financial Reporting Standards (IFRS)that identify preferred accounting practices.

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:

Explain the accounting equation and define its terms.

The basic financial statements include all of the following except:

Investing activities involve the buying and selling of assets such as land and equipment that are held for long-term use in the business.

Flitter reported net income of $17,500 for the past year.At the beginning of the year the company had $200,000 in assets and $50,000 in liabilities.By the end of the year,assets had increased to $300,000 and liabilities were $75,000.Calculate its return on assets:

What is the purpose of return on assets as an analytical tool?

A partnership is a business owned by two or more people.

Classify the following activities according to the appropriate section of the statement of cash flows. a.Operating activity b.Investing activity c.Financing activity ____ 1.Cash received from a one-time sale of used office equipment. ____ 2.Cash paid for dividends. ____ 3.Cash received from customers. ____ 4.Cash received from stockholder contributions. ____ 5.Cash paid for utilities. ____ 6.Cash paid for a delivery van to be used in the business.

Clawback provisions and whistleblower provisions are components of which legislation?

A company borrows $125,000 from the Northern Bank and receives the loan proceeds in cash.This represents a(n) :

________,which is one part of accounting,is the recording of transactions and events,either manually or electronically.

The monetary unit assumption means that companies should express transactions in terms such as "a lot" or "very little."