Deck 1: Uses of Accounting Information and the Financial Statements

Question 1

Accountants focus on the needs for financial information by both internal and external decision makers.

Answer 1

True

Question 2

The processing stage of accounting is accomplished by the recording of data.

Answer 2

False

Question 3

The terms "bookkeeping" and "accounting" are not synonymous.

Answer 3

True

Question 4

When a corporate stockholder sells his or her shares of stock,the corporation is technically dissolved.

Question 5

For reporting purposes,the personal assets and debts of a business owner should be combined with the assets and debts of the business.

Question 6

The stockholders of a corporation elect the board of directors.

Question 7

A partnership is dissolved when any partner leaves the business or dies.

Question 8

A corporation is an economic unit that is legally separate from its owners.

Question 9

Sole proprietorships in the United States generate more business (in terms of receipts)than partnerships and corporations put together.

Question 10

The personal resources of any partner can be called upon to pay the obligations of the partnership.

Question 11

The liability of corporate stockholders is limited to their percentage share of ownership.

Question 12

The day-by-day accumulation of interest is considered a transaction involving an exchange of value.

Question 13

Accountants consider money the common unit of measure for all business transactions.

Question 14

Payment to a creditor is an example of a nonexchange business transaction.

Question 15

In general,one partner acting alone cannot obligate the partnership to another party.

Question 16

Knowledge of the exchange rate is necessary to apply the money measure concept in case of international transactions.

Question 17

A company's management information system is a subsystem of its accounting information system.

Question 18

For accounting purposes,a business and its owner are considered the same entity.

Question 19

Corporations represent the largest number of businesses in the United States.

Question 20

Exchange rates for currency change daily according to the supply and demand for each currency.

Question 21

Accounts Receivable is an asset that is considered nonmonetary in nature.

Question 22

Net income is another term for revenues.

Question 23

The obligation to provide services to another entity is a type of liability.

Question 24

Dividends are an example of an expense.

Question 25

One way of stating the accounting equation is: Assets - Liabilities = Stockholders' Equity.

Question 26

Authorized shares of stock refer to the number of shares currently held by the stockholders.

Question 27

The number of authorized shares of stock may be less than the number of outstanding shares.

Question 28

Inventory is an example of a nonmonetary asset.

Question 29

Equity is increased when net income exceeds dividend distributions.

Question 30

The management of a corporation is responsible for electing the board of directors.

Question 31

Financial position may be assessed by referring to a balance sheet.

Question 32

Cash is another term for stockholders' equity.

Question 33

The articles of incorporation may be found in the corporate charter.

Question 34

The board of directors carries out the day-to-day operations of a corporation.

Question 35

Stockholders' equity equals assets minus liabilities.

Question 36

The board of directors appoints the audit committee,which in turn performs an independent audit of the company's records.

Question 37

Net assets equal stockholders' equity.

Question 38

Corporate governance is the oversight of a company's management performance and ethics by its board of directors.

Question 39

Creditors' equities is another term for liabilities.

Question 40

The economic resources invested in a business by the owners are represented by stockholders' equity.

Question 41

The statement of cash flows discloses significant events related to the operating,investing,and financing activities of a business.

Question 42

Companies whose securities are sold to the general public must adhere to standards established by the Securities and Exchange Commission.

Question 43

Independence means subordinating personal gain to service and the public trust.

Question 44

The board of directors appoints the audit committee,which in turn performs an independent audit of the company's records.

Question 45

The Public Company Accounting Oversight Board (PCAOB)was created to determine the standards that auditors must follow.

Question 46

The account 'Wages Payable' would appear on the income statement.

Question 47

Revenues have the effect of increasing stockholders' equity.

Question 48

An increase in expenses will have the effect of reducing stockholders' equity.

Question 49

Generally accepted accounting principles encompass the conventions,rules,and procedures necessary to define accepted accounting practice at a particular time.

Question 50

The International Accounting Standards Board is the primary and most important determinant of generally accepted accounting principles.

Question 51

The statement of retained earnings discloses the dividends distributed during the period.

Question 52

A proper heading for the income statement could include "For the Year Ended December 31,20--."

Question 53

The expenses incurred by an accounting firm would appear on its balance sheet.

Question 54

Due care means carrying out one's professional responsibilities with competence and diligence.

Question 55

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

Question 56

The heading for a balance sheet might include the line "For the Month Ended December 31,20--."

Question 57

The purchase of land with cash would be disclosed on the statement of cash flows.

Question 58

The Supplies Inventory account will appear as an expense on the income statement.

Question 59

The statement of retained earnings relates the income statement to the balance sheet by showing how the Retained Earnings account changed during the accounting period.

Question 60

The Internal Revenue Service is responsible for issuing accounting standards for state and local governments.

Question 61

Financing a business means obtaining funds so the business can begin and continue operating.

Question 62

Less than 20 percent of the U.S.economy is generated by governmental and not-for-profit organizations.

Question 63

The primary external users of accounting information are investors and management.

Question 64

Regulatory agencies are considered information users with an indirect financial interest.

Question 65

Paying taxes to the government is an example of an operating activity.

Question 66

Objectivity is the avoidance of all relationships that impair or appear to impair the objectivity of the accountant.

Question 67

The purchase of equipment is an example of an investing activity.

Question 68

Two major goals of business are to achieve profitability and to achieve liquidity.

Question 69

Net income is a measure of profitability.

Question 70

Accounting ratios are useful as management performance measures.

Question 71

Taxing authorities are considered accounting information users with a direct financial interest in a business.

Question 72

Liquidity means not having enough funds on hand to pay debts when they fall due.

Question 73

Creditors are those who lend money to others or deliver goods and services before being paid.

Question 74

Both public accountants and managerial accountants are required to adhere to a code of professional conduct.

Question 75

Financial accounting information is used primarily by management.

Question 76

Not-for-profit organizations have no obligation to report their financial performance to outside parties.

Question 77

Managerial accounting focuses on internal decision making.

Question 78

A business using cash to expand by purchasing land and a building is an example of an operating activity.

Question 79

The Federal Reserve Board is an example of a consumer group.

Question 80

The Securities and Exchange Commission is an accounting information user with an indirect financial interest in a business.