Deck 1: Accounting in Business

Question 1

The primary objective of managerial accounting is to provide general purpose financial statements to help external users analyze and interpret an organization's activities.

Answer 1

False

Question 2

The Sarbanes-Oxley Act (SOX)requires each issuer of securities to disclose whether it has adopted a code of ethics for its senior financial officers and the contents of that code.

Answer 2

True

Question 3

The Sarbanes-Oxley Act (SOX)does not require public companies to apply both accounting oversight and stringent internal controls.

Answer 3

False

Question 4

External users include lenders,shareholders,customers,and regulators.

Question 5

The fraud triangle asserts that the three factors that must exist for a person to commit fraud are opportunity,pressure,and rationalization.

Question 6

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

Question 7

Financial accounting is the area of accounting that provides internal reports to assist the decision making needs of internal users.

Question 8

Regulators often have legal authority over certain activities of organizations.

Question 9

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

Question 10

Opportunities in accounting include auditing,consulting,market research,and tax planning.

Question 11

Internal users include lenders,shareholders,brokers and managers.

Question 12

Internal operating activities include research and development,distribution,and human resources.

Question 13

Accounting is an information and measurement system that identifies,records,and communicates relevant,reliable,and comparable information about an organization's business activities.

Question 14

Identifying the proper ethical path is usually easy.

Question 15

In the partnership form of business,the owners are called stockholders.

Question 16

Bookkeeping is the recording of transactions and events and is only part of accounting.

Question 17

An accounting information system communicates data to help users make better decisions.

Question 18

Owners of a corporation are called shareholders or stockholders.

Question 19

The Financial Accounting Standards Board is the governmental agency that sets both broad and specific accounting principles.

Question 20

The balance sheet shows a company's net income or loss due to earnings activities over a period of time.

Question 21

The International Accounting Standards Board (IASB)is the government group that establishes reporting requirements for companies that issue stock to the public.

Question 22

General accounting principles arise from long-used accounting practices.

Question 23

The International Accounting Standards board (IASB)has the authority to impose its standards on companies around the world.

Question 24

The idea that a business will continue to operate instead of being closed or sold underlies the going-concern assumption.

Question 25

Understanding generally accepted accounting principles is not necessary to effectively use and interpret financial statements.

Question 26

Planning involves defining an organization's ideas,goals,and actions.

Question 27

A sole proprietorship is a business owned by one or more persons.

Question 28

The Securities and Exchange Commission (SEC)is a government agency that has legal authority to establish GAAP.

Question 29

The three common forms of business ownership include sole proprietorship,partnership,and non-profit.

Question 30

Specific accounting principles are basic assumptions,concepts,and guidelines for preparing financial statements and arise out of long-used accounting practice.

Question 31

The monetary unit assumption means that all companies doing business in the United States must express transactions and events in U.S.dollars.

Question 32

A limited liability company offers the limited liability of a partnership or proprietorship and the tax treatment of a corporation.

Question 33

The three major types of business activities are operating,financing,and investing.

Question 34

The business entity principle means that accounting information reflects a presumption that the business will continue operating instead of being closed or sold.

Question 35

The business entity assumption means that a business is accounted for separately from other business entities,including its owner or owners.

Question 36

Objectivity means that financial information is supported by independent,unbiased evidence.

Question 37

Generally accepted accounting principles are the basic assumptions,concepts,and guidelines for preparing financial statements.

Question 38

According to the cost principle,it is necessary for managers to report an approximation of an asset's market value upon purchase.

Question 39

As a general rule,revenues should not be recognized in the accounting records when earned,but rather when cash is received.

Question 40

Unlimited liability and separate taxation of the business are advantages of a sole proprietorship.

Question 41

Owner withdrawals are expenses.

Question 42

Owner financing refers to resources contributed by creditors or lenders.

Question 43

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

Question 44

Net income occurs when revenues exceed expenses.

Question 45

An external transaction is an exchange within an entity that may or may not affect the accounting equation.

Question 46

Revenues are increases in equity from a company's sales of products and services to customers.

Question 47

Return on assets is often stated in ratio form as the amount of average total assets divided by income.

Question 48

An owner's investment in a business normally creates an asset (cash),a liability (note payable),and owner's equity (investment. )

Question 49

Owner's investments are increases in equity from a company's earnings activities.

Question 50

Investing activities are the acquiring and disposing of resources that an organization uses to acquire and sell its products or services.

Question 51

A net loss occurs when revenues exceed expenses.

Question 52

Return on assets is also known as return on investment.

Question 53

From an accounting perspective,an event is a happening that affects the accounting equation,but cannot be measured.

Question 54

Liabilities are the owner's claim on assets.

Question 55

Investing activities are the means an organization uses to pay for resources like land,buildings,and equipment to carry out its plans.

Question 56

The accounting equation can be restated as: Assets - Equity = Liabilities.

Question 57

Owner's equity is increased when cash is received from customers in payment of previously recorded accounts receivable.

Question 58

Assets are the resources a company owns or controls that are expected to yield future benefits.

Question 59

Every business transaction leaves the accounting equation in balance.

Question 60

Strategic management is the process of determining the right mix of operating activities for the type of organization,its plans,and its market.

Question 61

An income statement reports on investing and financing activities.

Question 62

The statement of cash flows identifies cash flows separated into operating,investing,and financing activities over a period of time.

Question 63

Risk is the uncertainty about the return we will earn.

Question 64

The first section of the income statement reports cash flows from operating activities.

Question 65

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

Question 66

The four basic financial statements include the balance sheet,income statement,statement of owner's equity,and statement of cash flows.

Question 67

Return on assets reflects a company's ability to generate profit through productive use of its assets.

Question 68

The income statement shows the financial position of a business on a specific date.

Question 69

The income statement describes revenues earned and expenses incurred over a specified period of time due to earnings activities.

Question 70

Generally the lower the risk,the higher the return that can be expected.

Question 71

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

Question 72

Operating activities include long-term borrowing and repaying cash from lenders,and cash investments or withdrawals by the owner.

Question 73

The income statement reports on operating activities at a point in time.

Question 74

A balance sheet covers activities over a period of time such as a month or year.

Question 75

The balance sheet is based on the accounting equation.

Question 76

Ending capital reported on the statement of owner's equity is calculated by adding owner investments and net losses and subtracting net income and withdrawals.

Question 77

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.

Question 78

U.S.Government Treasury bonds provide low return and low risk to investors.

Question 79

Return on assets is useful to decision makers for evaluating management,analyzing and forecasting profits,and in planning activities.

Question 80

The purchase of supplies appears on the statement of cash flows as an investing activity because it involves the purchase of assets.