Deck 1: Business, Accounting, and You

Question 1

Accounting information is used to help managers and decision makers understand risk.

Answer 1

True

Question 2

What do we call the result obtained when revenue is less than cost?

A)Loss
B)Profit
C)Value
D)Risk

Answer 2

Loss

Question 3

Society is considered to be a stakeholder in a business.

Answer 3

True

Question 4

The value of an item is determined by taking the revenue from a sale and deducting the cost of the sale.

Question 5

Net income and profit are the same thing.

Question 6

The only way for business to get money is to borrow it.

Question 7

Businesses primarily exist to generate sales.

Question 8

Amounts owed to the business' owners as a result of an initial investment are called liabilities.

Question 9

Business owners expect to be compensated for both time and risk.

Question 10

Business owners are paid interest on the money they have invested in the business.

Question 11

To manage a business effectively, an owner or manager would benefit greatly from having some knowledge of accounting.

Question 12

When revenue exceeds cost, it is referred to as:

A)loss.
B)profit.
C)value.
D)risk.

Question 13

Which of the following is NOT part of the accounting process as it relates to information?

A)Measuring
B)Recognizing
C)Understanding
D)Reporting

Question 14

Liabilities are defined as:

A)earnings retained in the business.
B)amounts owed to lenders or creditors.
C)stockholders' claims to assets.
D)future economic benefits of a company.

Question 15

By taking accounting classes, the student is learning the "language of business."

Question 16

Which of the following would NOT be considered a stakeholder in a business?

A)An employee
B)A supplier
C)A regulator
D)All of the above are stakeholders

Question 17

All of the following would be considered a stakeholder in a business except

A)Customers
B)Lenders
C)Competitors
D)Society

Question 18

According to the textbook, in order for an organization to be called a business it must:

A)exchange a product with a customer.
B)make money.
C)be a corporation.
D)provide a service.

Question 19

The primary goal of any business is to

A)generate revenue.
B)sell products for a profit.
C)create value for its owners.
D)avoid too much debt.

Question 20

Which of the following impacts the value of an item to its owner?

A)When the owner expects to receive something in exchange for the item
B)How certain the owner is about what and when they will receive something in exchange for the item
C)What the owner expects to receive in exchange for the item
D)All of the above

Question 21

Which of the following types of organizations would produce goods?

A)Merchandising business
B)Service business
C)Manufacturing business
D)Both merchandising and manufacturing businesses produce goods.

Question 22

Lowe's and Home Depot would be examples of corporate merchandising businesses.

Question 23

What do we call amounts of money borrowed from lenders?

A)Asset
B)Liability
C)Expense
D)Revenue

Question 24

Stockholder's Equity represents:

A)an initial investment of cash by the owners.
B)a fair distribution of wealth in the firm.
C)retention of profits by a firm.
D)all of the above.
E)A and C only.

Question 25

Which of the following types of organization would primarily sell goods?

A)Merchandising business
B)Service business
C)Manufacturing business
D)Both Merchandising and Manufacturing businesses sell goods.

Question 26

The expense of using borrowed money for a period of time, is referred to as:

A)net income.
B)revenue.
C)liability.
D)interest.

Question 27

A business may be either a for-profit business or a not-for-profit business.

Question 28

Which of the following is a disadvantage of the corporate form of business?

A)Ease of raising capital
B)Double taxation
C)Limited resources
D)Limited liability

Question 29

Assets are defined as:

A)earnings retained in the business.
B)amounts owed to others.
C)stockholders' claims to assets.
D)economic resources of a company.

Question 30

All businesses are operated to generate a profit.

Question 31

Dental offices and law firms are service businesses.

Question 32

A business with one owner is called a sole proprietorship and it must be a service business.

Question 33

Shareholders must pay income tax on the dividends they have received from a corporation.

Question 34

Net income is defined as:

A)revenue plus expenses.
B)revenue less assets.
C)expenses less revenue.
D)revenue less expenses.

Question 35

A tax preparation business is primarily a:

A)merchandising operation.
B)service operation.
C)not-for-profit operation.
D)manufacturing operation.

Question 36

Which of the following is an advantage of a sole proprietorship?

A)Ease of formation
B)Limited liability of owner
C)Ease of raising capital
D)Unlimited life

Question 37

A limited liability company (LLC)is a legal entity like a corporation, but the income is taxed like a sole proprietorship or partnership.

Question 38

Which of the following does NOT describe Stockholders' Equity?

A)Profits retained in the business
B)Money lent to a business
C)The owners' claim on the assets of a company
D)Money invested in a business by its owners

Question 39

Which of the following is NOT an asset?

A)Net income
B)Inventory
C)Buildings
D)Cash

Question 40

The cost of money is above all else a function of

A)interest rates.
B)risk.
C)exchange rates.
D)rate of return.

Question 41

Which type of organization has stockholders?

A)Partnerships
B)Sole proprietorships
C)Corporations
D)Limited liability companies

Question 42

Due to the globalization of business, U.S. companies are no longer required to follow GAAP.

Question 43

Which type of organization is NOT considered a not-for-profit?

A)Charities
B)Churches
C)Chinese restaurant
D)All of the above are not-for-profits.

Question 44

One of the newer forms of business is a:

A)corporation.
B)sole proprietorship.
C)partnership.
D)limited liability company.

Question 45

Macy's and Kohls are examples of:

A)merchandising - specifically wholesale businesses.
B)manufacturing businesses.
C)merchandising - specifically retail businesses.
D)service and manufacturing businesses.

Question 46

Syd's Coffee sells bagged coffee to grocery stores for resale-what type of business is this?

A)Service business
B)Wholesale business
C)Retail business
D)None of the above

Question 47

Accounting is important because the process "keeps score" of the financial aspects of a business.

Question 48

The main role of accounting is to compile reports to determine the profit made by a company over a period of time.

Question 49

Lowe's would primarily be considered a:

A)manufacturing business.
B)merchandising business.
C)service business.
D)not-for-profit business.

Question 50

Illusions, Inc. produces high-end mirrors, which are sold in specialty boutiques throughout the country. What type and legal form of business is Illusions, Inc. ?

A)Manufacturing & Corporation
B)Merchandising & Corporation
C)Retail & Sole proprietorship
D)Service & Sole proprietorship

Question 51

The business entity concept requires that the owner's personal assets be separated from business assets.

Question 52

Which would NOT be an example of a for-profit business?

A)Toys 'R Us
B)Red Robin
C)Petsmart
D)Red Cross

Question 53

Which of the following business forms is similar to a corporation in regard to owner liability?

A)All businesses are the same with regard to owner liability.
B)Limited liability company
C)Sole proprietorship
D)Partnership

Question 54

Accountants should be highly ethical and must do everything they can to prevent fraud.

Question 55

A hybrid business entity with characteristics of both a corporation and a partnership is called:

A)S-Corporation.
B)P-Corporation.
C)LLC.
D)CP.

Question 56

Generally Accepted Accounting Principles (GAAP)are the rules and guidelines governing accounting.

Question 57

Financial information that is verifiable violates the principle of objectivity.

Question 58

Which of the following do NOT pay taxes on the business income through their individual owners?

A)S-corporation
B)Sole proprietorship
C)Partnership
D)Corporation

Question 59

According to the cost principle, if an appraised value is known - it should be used for recording purposes.

Question 60

Elle Wolfe is the owner of Sassycat Groomers, a pet grooming facility. She reports the business income on her personal tax return. What type and legal form of business would Sassycat be considered?

A)Retail & Sole proprietorship
B)Service & Corporation
C)Merchandising & Partnership
D)Service & Sole proprietorship

Question 61

Cash accounting recognizes business transactions when they occur.

Question 62

In the financial accounting records, most assets should be reported at:

A)current replacement cost.
B)current market value.
C)historical cost.
D)inflation-adjusted cost.

Question 63

Taking an inventory of goods on hand would be representative of what accounting concept or principle?

A)Going concern
B)Objectivity
C)Business entity
D)Cost

Question 64

IFRS stands for:

A)Internal Financial Report Standards.
B)International Financial Reports Study.
C)Internal Financial Reports Study.
D)International Financial Reporting Standards.

Question 65

Neil owns a sporting goods store. In his accounting records, he included his personal computer and all of his personal sporting gear. Neil is violating what principle of accounting?

A)Going concern
B)Cost
C)Reliability
D)Business entity

Question 66

Cash accounting recognizes business transactions when cash is received or paid.

Question 67

Simon lists his building at current replacement value, rather than the price he paid for the building. What principle is Simon violating?

A)Going concern
B)Cost
C)Reliability
D)Business entity

Question 68

When an owner combines their personal assets with the assets of their business, what concept or principle of accounting is being violated?

A)Going concern
B)Objectivity
C)Business entity
D)Cost

Question 69

What is an example of objective evidence?

A)Bank statements
B)Cancelled checks
C)Purchase receipts
D)All of the above
E)None of the above

Question 70

GAAP is the acronym for generally accepted ________ principles.

A)auditing
B)accounting
C)averaging
D)associated

Question 71

The guidelines that describe the rules of accounting are called:

A)GAAS.
B)GAAP.
C)FASB.
D)SEC.

Question 72

Flowers Forever recorded their delivery van at its current replacement value, rather than the price paid for the van. What principle did they violate?

A)Cost
B)Objectivity
C)Reliability
D)Going concern

Question 73

Considering the reliability principle - what would a bank statement represent?

A)Objective evidence
B)Market value confirmation
C)Current interest rates
D)Subjective evidence

Question 74

GAAP tries to ensure that accounting information is:

A)accurate, relevant, and factual.
B)relevant, understandable, and reliable.
C)understandable, realizable, and error-free.
D)reliable, historical, and accurate.

Question 75

Amber owns Serenity Spa Resort. In her accounting records, she lists the buildings at their current market value. Which principle is Amber violating?

A)Reliability
B)Cost
C)Business entity
D)None of the above

Question 76

Which accounting concept or principle specifically states that we should record transactions that can be verified?

A)Going-concern concept
B)Cost principle
C)Reliability principle
D)Business entity concept

Question 77

FASB is made up of how many members?

A)3
B)5
C)7
D)9

Question 78

The ________ issues pronouncements that are guidelines for accounting practice.

A)GAAP
B)SEC
C)FASB
D)IRS

Question 79

Gwen owns an antique store. In her accounting records, she includes her car-which is solely used for personal purposes. Which principle is Gwen violating?

A)Personal property
B)Cost
C)Reliability
D)Business entity

Question 80

The owner of Sassycat Designs wrote a company check to pay her personal credit card bill. What accounting principle did she violate?

A)Cost
B)Reliability
C)Business entity
D)No principle is violated-the bank account belongs to her, so it's okay to write checks.