Question 1

The advantages of a limited company (corporation) do NOT include
A) limited personal risk.
B) can continue indefinitely.
C) business decisions made by career administrators.
D) easy to set up.

Accepted Answer

Limited companies are not easy to set up due to the legal and regulatory requirements involved in their formation.

Question 2

Not-for-profit business are not permitted to earn any revenue.

Accepted Answer

Not-for-profit businesses are allowed to earn revenue, but the revenue must be used for the organization's stated mission or purpose rather than distributed as profits to owners or shareholders.

Question 3

The Sarbanes-Oxley Act in the United States and National Policies in Canada were passed to
A) prevent fraud at public companies.
B) replace all of the old accounting procedures with new ones.
C) improve the accuracy of the company's financial reporting.
D) Both A and C are correct.

Accepted Answer

The Sarbanes-Oxley Act was passed in 2002 after several high-profile accounting scandals to prevent fraud at public companies and improve the accuracy of their financial reporting. Similarly, National Policies in Canada aim to prevent corporate fraud and enhance the integrity of financial reporting. Therefore, both A and C are correct.

Question 4

Not-for-profit organizations
A) aim to improve society in some way.
B) seek to maximize profits.
C) usually obtain funding from donations and government grants.
D) Both A and C are correct.

Accepted Answer

Not-for-profit organizations are established to serve a social or public purpose rather than to maximize profits. They usually obtain funding from donations and government grants to support their mission and activities. Therefore, option A (aim to improve society in some way) and option C (usually obtain funding from donations and government grants) are correct.

Question 5

The primary objective of a not-for-profit business is to maximize revenue.

Accepted Answer

The primary objective of a not-for-profit business is not to maximize revenue, but rather to fulfill their mission and use their funds to benefit the organization's cause.

Question 6

Accounting reports are least helpful in answering which of the following questions?
A) How much cash was available at the end of the last year?
B) How well were the employees treated by management?
C) Did the company make a profit for the previous year?
D) Can the company pay its debts on time?

Accepted Answer

Accounting reports primarily deal with financial information and are designed to provide information on financial performance, liquidity, and financial position of an organization. Employee treatment is not a financial transaction and cannot be quantified in accounting reports. Therefore, accounting reports are least helpful in answering how well employees were treated by management.

Question 7

The type of business organization that can continue indefinitely is known as a
A) sole proprietorship.
B) partnership.
C) corporation.
D) None of the above.

Accepted Answer

A corporation is a type of business organization that can continue indefinitely as it has a separate legal identity from its owners. It can function even if its owners or shareholders pass away or sell their shares. Sole proprietorships and partnerships both have a limited lifespan, as they are tied to the life of their owners.

Question 8

Which of the following is a characteristic of a sole proprietorship?
A) Business owned by more than one person
B) Easy to form
C) Each stockholder acts as an owner of the company
D) Can continue indefinitely

Accepted Answer

A sole proprietorship is a business owned and operated by a single individual. One of the key advantages of a sole proprietorship is that it is the easiest type of business to form.

Question 9

Generally Accepted Accounting Principles are the procedures and guidelines that must be followed during the accounting process.

Accepted Answer

Generally Accepted Accounting Principles (GAAP) are a set of rules, standards, and procedures that companies must follow when compiling their financial statements, ensuring consistency and comparability across industries and time periods.

Question 10

Which of the following professional accounting designations has been replaced by "CPA"?
A) CA
B) CMA
C) CGA
D) All of the above

Accepted Answer

All three professional accounting designations (CA, CMA, CGA) have been replaced by the CPA (Chartered Professional Accountant) designation in Canada. This was done to create a unified and more streamlined accounting profession in the country.

Question 11

A partnership is a business which is
A) easy to form.
B) ends with the death of a partner.
C) owned by more than one person.
D) All of these answers are correct.

Accepted Answer

A partnership is a business owned by multiple individuals and is relatively easy to form. It can end with the death of a partner, dissolution or agreement among the partners. Therefore, all of the given options are correct.

Question 12

The purpose of the accounting process is to provide financial information about
A) sole proprietorships.
B) small businesses.
C) large corporations.
D) All of these answers are correct.

Accepted Answer

The accounting process is used to provide financial information for all types of businesses, including sole proprietorships, small businesses, and large corporations. Therefore, all of the answer choices are correct.

Question 13

Accounting provides information to
A) managers.
B) government.
C) investors.
D) All of these answers are correct

Accepted Answer

Accounting provides relevant financial information to all parties such as managers to make informed decisions, the government for regulatory purposes, and investors to evaluate the financial health of a firm. Hence, all options are correct.

Question 14

Which of the following is NOT a type of business organization?
A) Corporation
B) Partnership
C) Sole proprietorship
D) Operation

Accepted Answer

Corporation, partnership, and sole proprietorship are all types of business organization. "Operation" is not a type of business organization but rather a term used to refer to the activities of a business.

Question 15

A legal firm would be considered a
A) merchandise company.
B) manufacturer.
C) service company.
D) None of the above are correct.

Accepted Answer

A legal firm primarily provides services, such as legal advice and representation, rather than producing or selling physical products. Therefore, it would be categorized as a service company.

Question 16

A corporation
A) can continue indefinitely.
B) is owned by stockholders.
C) has limited risk to stockholders.
D) all of the above.

Accepted Answer

A corporation can continue indefinitely, it is owned by stockholders who have limited risk in terms of liability.

Question 17

Which is an advantage of a sole proprietorship form of business?
A) There is limited personal risk.
B) The business can continue indefinitely.
C) The owner makes all the decisions.
D) All of these answers are correct.

Accepted Answer

The owner of a sole proprietorship retains full control over the business and makes all the decisions, which is a distinct advantage of this form of business organization. Unlike corporations, sole proprietorships do not offer limited personal risk, nor do they inherently have the ability to continue indefinitely, as the business is closely tied to the life and decisions of the owner.

Question 18

Bookkeeping is primarily
A) preparing financial reports.
B) analyzing the company's financial position.
C) record-keeping.
D) preparing tax reports.

Accepted Answer

Bookkeeping is primarily the process of recording financial transactions and maintaining accurate and up-to-date financial records for a business. This includes tasks such as tracking income and expenses, reconciling accounts, and organizing financial data for use in preparing financial reports and tax returns. While bookkeeping can provide valuable data and insights for analyzing a company's financial position, this is not its primary function.

Question 19

Putting the information into the accounting system would be called
A) analyzing.
B) recording.
C) classifying.
D) summarizing.

Accepted Answer

Putting information into the accounting system is known as recording. The accounting process involves several steps such as analyzing, classifying, summarizing, and interpreting financial transactions.

Question 20

The new accounting designation for Canada is CGA.

Accepted Answer

The new accounting designation for Canada is CPA (Chartered Professional Accountant), which replaced the older designations of CA (Chartered Accountant), CMA (Certified Management Accountant), and CGA (Certified General Accountant).

Quiz 1: Accounting Concepts and Procedures: an Introduction

The advantages of a limited company (corporation) do NOT include

Not-for-profit business are not permitted to earn any revenue.

The Sarbanes-Oxley Act in the United States and National Policies in Canada were passed to

Not-for-profit organizations

The primary objective of a not-for-profit business is to maximize revenue.

Accounting reports are least helpful in answering which of the following questions?

The type of business organization that can continue indefinitely is known as a

Which of the following is a characteristic of a sole proprietorship?

Generally Accepted Accounting Principles are the procedures and guidelines that must be followed during the accounting process.

Which of the following professional accounting designations has been replaced by "CPA"?

A partnership is a business which is

The purpose of the accounting process is to provide financial information about

Accounting provides information to

Which of the following is NOT a type of business organization?

A legal firm would be considered a

A corporation

Which is an advantage of a sole proprietorship form of business?

Bookkeeping is primarily

Putting the information into the accounting system would be called

The new accounting designation for Canada is CGA.