Deck 1: Accounting in Business

Question 1

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

Answer 1

True

Question 2

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 2

False

Question 3

Regulators often have legal authority over certain activities of organizations.

Answer 3

True

Question 4

Internal users include lenders, shareholders, brokers and managers.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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.

Question 10

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

Question 11

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

Question 12

Owners of a corporation are called shareholders or stockholders.

Question 13

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

Question 14

Identifying the proper ethical path is usually easy.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

General accounting principles arise from long-used accounting practices.

Question 26

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

Question 27

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

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

Net income occurs when revenues exceed expenses.

Question 42

Every business transaction leaves the accounting equation in balance.

Question 43

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

Question 44

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

Question 45

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

Question 46

Return on assets is also known as return on investment.

Question 47

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

Question 48

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

Question 49

Liabilities are the owner's claim on assets.

Question 50

A net loss occurs when revenues exceed expenses.

Question 51

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

Question 52

Owner financing refers to resources contributed by creditors or lenders.

Question 53

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

Question 54

Dividends are expenses.

Question 55

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

Question 56

Common stock is an increase in equity from a company's earnings activities.

Question 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

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

Question 62

The balance sheet is based on the accounting equation.

Question 63

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 64

Ending retained earnings on the statement of retained earnings is calculated by adding stockholder investments and net losses and subtracting net income and dividends.

Question 65

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

Question 66

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

Question 67

An income statement reports on investing and financing activities.

Question 68

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

Question 69

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

Question 70

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

Question 71

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

Question 72

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

Question 73

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

Question 74

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

Question 75

The four basic financial statements include the balance sheet, income statement, statement of retained earnings, and statement of cash flows.

Question 76

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

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

Operating activities include long-term borrowing and repaying cash from lenders, and cash investments or dividends to stockholders.

Question 80

Risk is the uncertainty about the return we will earn.