Deck 1: The Role of Accounting in Business

Question 1

A business stakeholder has an interest in the economic performance of a business.

Answer 1

True

Question 2

A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.

Answer 2

True

Question 3

The objective of most businesses is to maximize profits.

Answer 3

True

Question 4

Creditors have preference to assets behind stockholders if a business fails.

Question 5

Merchandising businesses produce products rather than provide services to customers.

Question 6

Companies using a low-cost emphasis provide products and services that compete on features other than price.

Question 7

A corporation is a business that is legally separate and distinct from its owners.

Question 8

Merchandising businesses must be corporations.

Question 9

Large corporations such as ExxonMobil and Walmart are organized as limited liability corporations.

Question 10

A partnership is owned by two or more individuals.

Question 11

The popularity of the sole proprietorship is due to the ease and low cost of organizing.

Question 12

A limited liability corporation combines attributes of a partnership and a corporation.

Question 13

Accounting is thought to be the "language of business" because business information is communicated to stakeholders.

Question 14

The basic type of stock issued to owners is called common stock.

Question 15

Assets are acquired through investing activities when resources are purchased.

Question 16

Manufacturing businesses change basic inputs into products that are sold to individual customers.

Question 17

Over 90% of the total dollars of business receipts are received by proprietorships.

Question 18

The Stockholders' Equity of a company should equal the total of its Total Assets and Total Liabilities.

Question 19

Stockholders in a corporation are internal stakeholders.

Question 20

Porsche is an example of a business that uses a premium-price emphasis to attract customers.

Question 21

Which of the following would NOT be an example of a merchandising business?

A)Ford Motor Company
B)Safeway
C)Barnes & Noble
D)Starbucks

Question 22

The following are examples of internal stakeholders EXCEPT:

A)managers.
B)creditors.
C)employees.
D)All of these are internal stakeholders.

Question 23

Motel 6 is an example of a business using which of the following?

A)Low-cost emphasis
B)Combination emphasis
C)Differentiation strategy
D)Premium-price emphasis

Question 24

Which of the following are business stakeholders?

A)Stockholders
B)Suppliers
C)Customers
D)All of these

Question 25

Under a premium-price emphasis,a business designs products that possess __________ for which customers are willing to pay a premium price.

A)unique attributes
B)high costs
C)competitive efficiencies
D)longer warranties

Question 26

More that 70% of businesses are organized as what type of business?

A)Not-for-profit
B)Corporation
C)Partnership
D)Sole proprietorship

Question 27

Governments have an interest in the economic performance of business because of

A)tax collections.
B)community involvement from the business.
C)business incentives.
D)all of these.

Question 28

Which of the following is NOT a characteristic of a cdorporation?

A)Corporations are organized as a separate legal taxable entity.
B)Ownership is divided into shares of stock.
C)Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D)A corporation's resources are limited to its individual owners' resources.
E)Corporations make up 20% of all businesses.

Question 29

Which of the items below is NOT a business organization form?

A)Venture entrepreneurship
B)Proprietorship
C)Partnership
D)Corporation

Question 30

Which of the following is TRUE in regards to a limited liability company?

A)It is organized as a corporation.
B)It can elect to be taxed as a partnership.
C)It provides tax and liability advantages to the owners.
D)All are correct.

Question 31

Due to various fraudulent business practices and accounting coverups in the early 2000s,Congress enacted the Sarbanes-Oxley Act of 2002.The act was responsible for establishing a new oversight board for public accountants called the

A)Generally Accepted Accounting Practices for Public Accountants Board.
B)Public Company Accounting Oversight Board.
C)Congressional Accounting Oversight Board.
D)None are correct.

Question 32

What is the primary objective of most businesses?

A)To maximize profits
B)To pay dividends to stockholders
C)To provide a benefit to society
D)To manufacture a quality product

Question 33

A low-cost emphasis strives to provide

A)no-frills,standardized products and services.
B)products and services that provide unique market needs.
C)products and services that provide prestige and image for customers.
D)products and services that compete on features other than price.

Question 34

Which of the following businesses use a premium-price emphasis?

A)Value City Furniture
B)Abercrombie & Fitch
C)Wal-Mart Supercenters
D)Southwest Airlines

Question 35

Who has first preference to assets in case a business fails?

A)Stockholders
B)Long-term creditors
C)Customers
D)Employees

Question 36

An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a

A)proprietorship.
B)corporation.
C)partnership.
D)governmental unit.

Question 37

Which of the following is NOT an example of a capital market stakeholder?

A)Banks
B)Owners
C)Suppliers
D)Stockholders

Question 38

Capital market stakeholders have an interest in the company because

A)they provide incentives for the company to market their products.
B)they are part of the Marketing Department that is responsible for promoting the products or services to increase the business profits.
C)they help market their products to customers or find vendors to supply needed inputs.
D)they provide major financing for the business.

Question 39

The Balance Sheet represents the accounting equation.

Question 40

Managers are evaluated primarily on the business's

A)tax collections.
B)growth.
C)economic performance.
D)all of these.

Question 41

The purchase of factory equipment would be an example of which type of business activity?

A)Financing
B)Investing
C)Operating
D)All of these

Question 42

Shares of ownership are evidenced by issuing

A)bonds payable.
B)commercial paper.
C)shares of stock.
D)notes payable.

Question 43

Browning,Inc.had revenues of $234,000,expenses of $175,000,and dividends of $30,000 during 2010.Which of the following statements is correct?

A)Net income for 2010 totaled $29,000.
B)Net income for 2010 totaled $59,000.
C)Total retained earnings increased by $59,000 during 2010.
D)Total retained earnings decreased by $30,000 during 2010.

Question 44

Costs incurred in operating a business are also known as

A)revenues.
B)expenses.
C)liabilities.
D)dividends.

Question 45

Which of the following is considered an asset until consumed?

A)Accounts payable
B)Prepaid expense
C)Accounts receivable
D)Stockholders' equity

Question 46

Financing activities involve obtaining __________ to operate a business.

A)products
B)customers
C)business incentives
D)funds

Question 47

When a product is sold,this cost is often called

A)cost of goods sold.
B)revenue.
C)products.
D)retained earnings.

Question 48

Which of the following is an example of an intangible asset?

A)Patent
B)Cash
C)Land
D)Equipment

Question 49

Rights to payments from customers are

A)liabilities.
B)prepaid expenses.
C)accounts receivable.
D)accounts payable.

Question 50

A note payable requires payment of the amount borrowed plus

A)interest.
B)cash.
C)accounts payable.
D)investments.

Question 51

Gilbert,Inc.had the following account balances at September 30,2010.What is Gilbert's net income for the month of September?

A)$32,450
B)$27,450
C)$6,550
D)$18,150

Question 52

__________ is the increase in assets from selling products and services.

A)Revenue
B)Liabilities
C)Products
D)Stockholders' Equity

Question 53

When a business borrows money,it incurs a(n)

A)tax.
B)liability.
C)receivable.
D)addtional equity.

Question 54

A summary of revenue and expenses for a specific period of time is a(n)

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)retained earnings statement.

Question 55

Which statement is normally prepared first?

A)Income statement
B)Balance sheet
C)Statement of cash flows
D)Retained earnings statement

Question 56

The role of accounting in business is best defined as

A)an information system that provides reports to stakeholders about the economic activities and condition of a business.
B)a method of forecasting the future profitability of a company.
C)the policies,procedures,and strategies used in a business.
D)transaction analysis.

Question 57

Debts owed by a business are referred to as

A)accounts receivable.
B)equities.
C)stockholders' equity.
D)liabilities.

Question 58

Cash collected from sales during the normal course of business would be an example of which type of business activity?

A)Operating
B)Investing
C)Financing
D)None of these

Question 59

Reporting the financial condition of a business at a point in time and the changes in the financial condition of a business over a period of time are the two major objectives of

A)tax accounting.
B)union contracts.
C)managerial accounting.
D)financial accounting.

Question 60

The resources a business owns are called

A)assets.
B)liabilities.
C)earnings.
D)stockholders' equity.

Question 61

Use the following information to determine Total Stockholders' Equity:

A)$52,000
B)$50,000
C)$35,000
D)$22,000

Question 62

If there was no beginning retained earnings,net income of $20,000,and ending retained earnings of $6,000,how much were dividends?

A)$10,000
B)$4,000
C)$6,000
D)$14,000

Question 63

A summary of changes in the earnings retained in the corporation for a specific period of time is a(n)

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)retained earnings statement.

Question 64

Cash investments made by the stockholders of the business are reported on the statement of cash flows in the

A)financing activities section.
B)investing activities section.
C)operating activities section.
D)supplemental statement.

Question 65

Recording revenue when a sale is made most directly relates to which concept?

A)Going concern concept
B)Periodicity concept
C)Matching concept
D)Adequate disclosure concept

Question 66

A list of assets,liabilities,and owners' equity as of a specific date is a(n)

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)retained earnings statement.

Question 67

The portion of a corporation's net income retained in the business is called

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)retained earnings.

Question 68

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time,such as a month or year,is called a(n)

A)prior period statement.
B)statement of retained earnings.
C)income statement.
D)balance sheet.

Question 69

During 2010,Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000.Assuming that capital stock increased by $5,000 and no dividends were paid,calculate Smith's net income or net loss for 2010.

A)Net loss of $15,000
B)Net loss of $20,000
C)Net loss of $25,000
D)Net income of $15,000

Question 70

The "rules" of accounting are called

A)income tax regulations.
B)SEC regulations.
C)Internet rules.
D)Generally Accepted Accounting Principles.

Question 71

Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept?

A)Adequate disclosure concept
B)Going concern concept
C)Objectivity concept
D)Business entity concept

Question 72

Given the following list of accounts,calculate Total Assets:

A)$84,100
B)$59,700
C)$46,250
D)$39,700

Question 73

Which principle determines the amount initially entered into the records for purchases?

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

Question 74

Heedy Company had the following account balances in 2010 and 2011,respectively.Assuming dividends of $20,000 were paid in 2011,how much was net income?

A)$62,000
B)$82,000
C)$272,000
D)$252,000

Question 75

Name the three different types of businesses that operate for profit and their respective characteristics.

Question 76

Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept?

A)Business entity concept
B)Going concern concept
C)Objectivity concept
D)Adequate disclosure concept

Question 77

Name and describe the three forms of businesses and their advantages and disadvantages (if any).

Question 78

Which of the following is an appropriate representation of the accounting equation?

A)Assets + liabilities = stockholders' equity
B)Assets = liabilities + stockholders' equity
C)Assets = liabilities
D)Assets = liabilities + retained earnings

Question 79

A summary of the cash receipts and cash payments for a specific period of time is a(n)

A)income statement.
B)balance sheet.
C)statement of cash flows.
D)retained earnings statement.

Question 80

The debt created by a business when it makes a purchase on account is referred to as an

A)account payable.
B)account receivable.
C)asset.
D)expense payable.