Deck 1: Accounting in Action

Question 1

IFRS follows one measurement principle knows as the cost principle.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

International Financial Reporting Standards are determined by the IASB.

Question 20

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

Question 21

Accountants record both internal and external transactions.

Question 22

The basic accounting equation states that Assets = Liabilities.

Question 23

Providing services for cash increases assets and equity.

Question 24

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

Question 25

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

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

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

Question 28

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

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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 41

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 42

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

Question 43

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 44

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 the company.

Question 45

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

Question 46

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

Question 47

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 48

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

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

Question 49

The accounting process involves all of the following except

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

Question 50

Accountants do not have to worry about issues of ethics.

Question 51

The process of recording transactions has become more efficient because

A)fewer events can be quantified in financial terms.
B)computers are used in processing business events.
C)more people have been hired to record business transactions.
D)business events are recorded only at the end of the year.

Question 52

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

Question 53

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

Question 54

The use of computers in recording business events

A)has made the recording process more efficient.
B)does not use the same principles as manual accounting systems.
C)has greatly impacted the identification stage of the accounting process.
D)is economical only for large businesses.

Question 55

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

Question 56

Which of the following techniques are 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 57

Accountants refer to an economic event as a

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

Question 58

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

Question 59

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

Question 60

The accounting process is correctly sequenced as

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

Question 61

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 the above are external users of accounting information.

Question 62

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process?

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

Question 63

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 64

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

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

Question 65

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.

Question 66

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 67

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 68

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

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

Question 69

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

A)Regulatory agencies.
B)Customers.
C)Investors.
D)All of these are external users.

Question 70

The Duce Company has five plants nationwide that cost $100 million.The current fair value of the plants is $500 million.The plants will be recorded and reported as assets at

A)$100 million.
B)$600 million.
C)$400 million.
D)$500 million.

Question 71

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 72

The cost principle requires that companies record assets at their

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

Question 73

IFRSs 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 74

GAAP stands for

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

Question 75

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 76

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 77

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 78

The fair value principle

A)is one of the two costing principles followed by the IASB.
B)is more useful than the 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 the above.

Question 79

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 80

The origins of accounting are generally attributed to the work of

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