Deck 1: Accounting in Action

Question 1

IFRS follows one measurement principle known as the historical cost principle.

Answer 1

False

Question 2

Bookkeeping and accounting are one and the same because the bookkeeping function includes the accounting process.

Answer 2

False

Question 3

Financial statements are the major means of communicating accounting information to interested parties.

Answer 3

True

Question 4

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

Question 5

The process of reducing the differences between Generally Accepted Accounting Principles and International Financial Reporting Standards is known as convergence.

Question 6

Even though a partnership is not a separate legal entity, for accounting purposes the partnership affairs should be kept separate from the personal activities of the owners.

Question 7

The primary accounting standard-setting body in the United States is the International Accounting Standards Board.

Question 8

The two primary accounting standard-setting bodies are the International Accounting Standards Board and the Financial Accounting Standards Board.

Question 9

The Financial Accounting Standards Board is a part of the International Accounting Standards Board.

Question 10

Accounting information is used only by external users with a financial interest in a business enterprise.

Question 11

Most companies in the United States follow standards issued by the IASB.

Question 12

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

Question 13

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

Question 14

The German Confederation of Trade Unions is an example of an external user of accounting information.

Question 15

The State Administration of Taxation in the People's Republic of China is an example of an internal user of accounting information.

Question 16

Accountants rely on a fundamental business concept-ethical behavior-in reporting financial information.

Question 17

The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

Question 18

The hiring of a new company president is an economic event recorded by the financial information system.

Question 19

Transactions that can be measured in dollars and cents are recorded in the financial information system.

Question 20

International Financial Reporting Standards are determined by the IASB.

Question 21

The ending retained earnings balance is reported on the statement of financial position.

Question 22

Owners' claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

Question 23

The two components of equity are retained earnings and share capital.

Question 24

The principal source of equity is amounts paid in by shareholders.

Question 25

Accountants record both internal and external transactions.

Question 26

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.

Question 27

Providing services for cash increases assets and equity.

Question 28

Share capital is the total amount paid in by shareholders for shares purchased.

Question 29

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

Question 30

The purchase of an asset on account increases assets and decreases equity.

Question 31

The statement of financial position is also known as the balance sheet.

Question 32

Foreign companies whose shares are traded on U.S. stock markets must use GAAP.

Question 33

Expenses are increases in equity that result from operating the business.

Question 34

The purchase of office equipment on credit increases total assets and total liabilities.

Question 35

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

Question 36

The purchase of store equipment for cash reduces the equity by an equal amount.

Question 37

The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.

Question 38

Internal transactions do not affect the basic accounting equation because they are economic events that occur entirely within one company.

Question 39

In order to possess future service potential, an asset must have physical substance.

Question 40

The basic accounting equation states that Assets = Liabilities.

Question 41

The accounting process is correctly sequenced as

A) identification, communication, recording.
B) recording, communication, identification.
C) identification, recording, communication.
D) communication, recording, identification.

Question 42

Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CAs and CPAs.

Question 43

External transactions involve economic events between the company and some other enterprise or party.

Question 44

The study of accounting is not useful for a business career unless your career objective is to become an accountant.

Question 45

Management consulting includes examining the financial statements of companies and expressing an opinion as to the fairness of their presentation.

Question 46

Identifying is the process of keeping a chronological diary of events measured in dollars and cents.

Question 47

Which of the following would not be considered an external user of accounting data for the GHI Company?

A) Taxing authority representative.
B) Management.
C) Creditors.
D) Customers.

Question 48

In the retained earnings statement, revenues are listed first, followed by expenses, and net income (or net loss).

Question 49

Communication of economic events is the part of the accounting process that involves

A) identifying economic events.
B) quantifying transactions into dollars and cents.
C) preparing accounting reports.
D) recording and classifying information.

Question 50

The accounting process includes each of the following except

A) communication.
B) convergence.
C) identification.
D) recording.

Question 51

Which of the following techniques is not used by accountants to interpret and report financial information?

A) Graphs.
B) Special memos for each class of external users.
C) Charts.
D) Ratios.

Question 52

Bookkeeping primarily involves which of the following parts of the accounting process?

A) Identification.
B) Communication.
C) Recording.
D) Analysis.

Question 53

Which of the following would not be considered internal users of accounting data for a company?

A) The president of a company.
B) The controller of a company.
C) Creditors of a company.
D) Salesmen of a company.

Question 54

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.

Question 55

The accounting process involves all of the following except

A) identifying economic events that are relevant to the business.
B) communicating financial information to users by preparing financial reports.
C) recording non-quantifiable economic events.
D) analyzing and interpreting financial reports.

Question 56

Accountants do not have to worry about issues of ethics.

Question 57

Recording of economic events involves

A) keeping a systematic, chronological diary of events.
B) analyzing reported information.
C) explaining the meaning of reported data.
D) preparing accounting reports.

Question 58

Which of the following events cannot be quantified into dollars and cents and recorded as an accounting transaction?

A) The appointment of a new accounting firm to perform an audit.
B) The purchase of a new computer.
C) The sale of store equipment.
D) Payment of income taxes.

Question 59

Accountants refer to an economic event as a

A) purchase.
B) sale.
C) transaction.
D) change in ownership.

Question 60

The monetary unit assumption requires that all dollar amounts be rounded to the nearest dollar.

Question 61

Most assets should be valued at cost because fair values

A) are not useful for decision-making.
B) may not be representationally faithful.
C) are not relevant.
D) may be higher or lower than historical cost.

Question 62

The origins of accounting are generally attributed to the work of

A) Christopher Columbus.
B) Abner Doubleday.
C) Luca Pacioli.
D) Leonardo da Vinci.

Question 63

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

A) President of the company.
B) Production manager.
C) Merchandise inventory clerk.
D) President of the employees' labor union.

Question 64

Convergence refers to

A) using the same accounting principles from one period to the next.
B) use of the same accounting principles by all companies.
C) the elimination of all accounting standard-setting bodies except the International Accounting Standards Board.
D) the process of reducing the differences between IFRS and GAAP.

Question 65

Financial accounting provides economic and financial information for each of the following except

A) creditors.
B) investors.
C) managers.
D) other external users.

Question 66

The body that has the power to prescribe the accounting practices and standards used by most US companies is the

A) FASB.
B) IASB.
C) GAAP.
D) IFRS.

Question 67

External users of accounting information include all of following except

A) the shareholders of Air Italy.
B) the management of Pirelli.
C) a potential customers of Olivetti.
D) All of these answer choices are correct.

Question 68

The Duce Company has five plants nationwide that cost $200 million. The current fair value of the plants is $500 million. The plants will be recorded and reported as assets at

A) $200 million.
B) $700 million.
C) $300 million.
D) $500 million.

Question 69

External users of accounting information include the

A) lnternational Accounting Standards Board.
B) shareholders of Ferragamo.
C) Marketing department at Olivetti.
D) CEO of Air Italy.

Question 70

The final step in solving an ethical dilemma is to

A) identify and analyze the principal elements in the situation.
B) recognize an ethical situation.
C) identify the alternatives and weigh the impact of each alternative on stakeholders.
D) recognize the ethical issues involved.

Question 71

The first step in solving an ethical dilemma is to

A) identify and analyze the principal elements in the situation.
B) identify the alternatives.
C) recognize an ethical situation and the ethical issues involved.
D) weigh the impact of each alternative on various stakeholders.

Question 72

Which one of the following is not an external user of accounting information?

A) Regulatory agencies.
B) Customers.
C) Investors.
D) All of these answer choices are correct.

Question 73

Which of the following is an external user of accounting information?

A) Labor unions.
B) Finance directors.
C) Company officers.
D) Managers.

Question 74

Internal users of accounting information include all of following except the

A) CEO of Sony.
B) Human Resources department at Hyundai.
C) Marketing department at Braun.
D) Shareholders of Airbus.

Question 75

Internal users of accounting information include

A) the shareholders of Royal Dutch Shell.
B) the State Administration of Taxation of China.
C) the Chief Financial officer of Credit Suisse.
D) the International Accounting Standards Board.

Question 76

Ethics are the standards of conduct by which one's actions are judged as

A) right or wrong.
B) honest or dishonest.
C) fair or unfair.
D) All of these answer choices are correct.

Question 77

The fair value principle

A) is one of the two costing principles followed by the IASB.
B) is more useful than the historical cost principle for valuing some assets.
C) dictates that an asset should be valued at the price at which it could be sold.
D) All of these answer choices are correct.

Question 78

GAAP stands for

A) Generally Accepted Auditing Procedures.
B) Generally Accepted Accounting Principles.
C) Generally Accepted Auditing Principles.
D) Generally Accepted Accounting Procedures.

Question 79

IFRS are determined by the

A) Internal Accounting Standards Body.
B) International Accounting Studies Board.
C) International Accounting Standards Board.
D) International Auditors' Standards Body.

Question 80

The historical cost principle requires that companies record assets at their

A) appraisal value.
B) cost.
C) market price.
D) list price.