Deck 1: Business, Accounting, and You

Question 1

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

Answer 1

B

Question 2

Net income and profit are the same thing.

Answer 2

True

Question 3

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

Answer 3

D

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

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 9

Businesses primarily exist to generate sales.

Question 10

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

Question 11

When revenue exceeds cost,it is referred to as:

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

Question 12

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 13

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 14

Liabilities are defined as:

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

Question 15

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

Question 16

Society is considered to be a stakeholder in a business.

Question 17

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

Question 18

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

Question 19

The value of an item does NOT depend on when it is expected to be received.

Question 20

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

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

Question 21

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

Question 22

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 23

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 24

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 25

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 26

Which of the following types of organizations would produce goods?

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

Question 27

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

Question 28

Law and accounting firms are service businesses.

Question 29

Wal-Mart and Target would be examples of corporate merchandising businesses.

Question 30

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

Question 31

Net income is defined as:

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

Question 32

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 33

A tax preparation business is primarily a:

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

Question 34

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 35

Which type of organization has stockholders?

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

Question 36

What do we call amounts of money borrowed from lenders?

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

Question 37

Owner'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 38

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

Question 39

Which of the following is NOT an asset?

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

Question 40

All businesses are operated to generate a profit.

Question 41

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

Question 42

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 43

Sasha owns a bakery.In her accounting records,she includes her car-which is solely used for personal purposes.Which principle is Sasha violating?

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

Question 44

One of the newer forms of business is a:

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

Question 45

Which of the following has double taxation of earnings?

A)Limited liability company
B)Proprietorship
C)Corporation
D)Partnership

Question 46

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

Question 47

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

Question 48

Which type of business organization is owned by its stockholders?

A)Corporation
B)Partnership
C)Limited liability company
D)Sole proprietorship

Question 49

Market value and historical cost (value)are the same concept.

Question 50

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 51

The Financial Accounting Standards Board (FASB)established the standards for managerial accounting.

Question 52

Home Depot would primarily be considered a:

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

Question 53

Caesar'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 54

Alicia owns a sporting goods store.In her accounting records,she included her personal computer and all of her personal sporting gear.Alicia is violating what principle of accounting?

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

Question 55

Jenesse owns the Garden Inn.In her accounting records,she lists the buildings at their current market value.Which principle is Jenesse violating?

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

Question 56

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

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

Question 57

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

Question 58

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

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

Question 59

Financial information that is verifiable violates the principle of objectivity.

Question 60

Go Fresh delivery 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 61

The ________ issues pronouncements that are guidelines for accounting practice.

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

Question 62

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

Question 63

IFRS stands for:

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

Question 64

Accountants who ignore the effect of inflation on prices may be violating which accounting principle?

A)Going concern
B)Business entity
C)Reliability
D)Something other than what is listed

Question 65

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 66

Which of the following events would be recorded in the financial accounting records of Acme Lawn Service,Inc.?

A)Acme mows 125 lawns.
B)Acme buys 5 new lawn mowers from Lawn Equipment,Inc.
C)Lawn Equipment,Inc.sells 2 mowers to Acme's competitor,Best Lawns,Inc.
D)Events A and B should both be recorded in the financial accounting records of Acme.

Question 67

The guidelines that describe the rules of accounting are called:

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

Question 68

Accrual accounting recognizes business transactions when they occur.

Question 69

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 70

Liabilities are obligations owed to third parties.

Question 71

The owner of Good Dog Daycare 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.

Question 72

GAAP is the acronym for generally accepted ________ principles.

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

Question 73

Cash accounting recognizes business transactions when they occur.

Question 74

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 75

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 76

The fundamental accounting equation is Assets plus Liabilities equals Stockholders' Equity.

Question 77

The accounting principle that best defines a business is:

A)business entity.
B)cost.
C)reliability.
D)going concern.

Question 78

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 79

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

Question 80

FASB is made up of how many members?

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